Is your home classified as an Investment Property with your Lender ?
Is the home you own and live in classified as an Investment Loan with your Lender ?. If so, you may be facing an immediate interest rate rise.
It has been many years since the Lending institutions have had differential interest rate pricing on Owner Occupied versus Investment housing. For those of us old enough to remember back to the ‘Eighties’, Investment Housing loans were up to a full two percent higher than the equivalent Owner Occupied Loan.
Interest Rates are on the rise
This pricing differential has now re-commenced with a number of Lenders in the last week announcing increases to both new and existing loans that are designated as a Residential Investment Loan. Increases to date have been announced between 0.27% – 0.30%, however some Lenders at the same time have reduced the rate for Owner Occupied loans making the actual differential rate larger than the level of the increase just announced.
Many borrowers when purchasing their home, may have initially used the home as an investment and over time, subsequently taken up residence in the home. While you may have informed the Lender of the change of address, your loan may still be recorded as a Residential Investment Loan, meaning your rate may soon rise.
Why is the happening ?
Recently there have been concerns about the rapid rises occurring in the housing markets. These rises have been concentrated in the Capital Cities (particularly Sydney and Melbourne). Banks have been lending strongly into these rising markets with a heavy trend on the volume of investor activity that is currently present. Government departments that keep a regulatory eye on the Banking Sector have highlighted that many Banks are now “overweight” with Investment lending versus Owner Occupied lending. The Government have introduced performance hurdles to ensure the Banks change their lending mix overtime. Placing a cap on the level of permitted growth in Investor Lending is one measure being used.
What Should You Do ?
If you believe your loan is regarded by your Lender as an Investment Loan and you are currently living in the property, you should take action to have the loan re-assessed, so that your interest rate does not unnecessarily increase. Consulting a Broker, will ensure you get an unbiased review of your situation and be placed in the most suitable home loan for your current situation. Even if you stay with the same Lender, a Broker can often negotiate a better rate than what Lenders advertise to the public.
Customers First Mortgages &Insurance have a panel of more than 20 Lenders that will ensure you get a competitive assessment and pay no more than you have to. At the same time, you could give consideration to any debt consolidation needs and / or future investment goals. Please call us today for a no obligation discussion.
Customers First Mortgages & Insurance
1300 275 536