Lenders’ view: What banks are looking for from borrowers in 2018

Apr 9, 2018


Despite property prices easing in real estate hotspots such as Sydney and Melbourne, it remains a challenging environment for home loan borrowers in 2018.

Several factors are driving the conditions including stricter mortgage lending rules from the Australian Prudential Regulation Authority (APRA).

APRA last year introduced measures to cap interest-only lending to 30 per cent of all new loans issued by banks, causing the growth rate of these types of loans to drop to record lows, according to RBA figures.

In addition, authorities have cracked down on loans for investment properties, resulting in a 10 per cent limit on annual home-investor loan growth.

Will lenders ease restrictions?

There are several signs the situation may be improving for borrowers in 2018.

One positive development is APRA’s recent revelation that its investor limits are potentially becoming “redundant” as demand eases in key hotspots.

This could mean that the banking regulator may soon relax the investor lending rules, potentially making it easier for investors to get back into the property market.

Foreign investors in spotlight

Additionally, borrowers now have a new edge over foreign investors. That’s due to a number of states enacting a foreign citizen stamp duty surcharge to slow down foreign property investment.

The surcharge relates to foreigners buying property in NSW, Victoria, Queensland and South Australia. They will need to pay a stamp duty levy and, in some states, a land tax surcharge.

First home buyers

Another upbeat trend is the lift in lending to first home buyers.

According to Australian Bureau of Statistics, the value of home loans issued in January lifted to $33 billion – the fourth increase in the past five months.

Importantly, lending to first home buyers was a big part of that, with approvals for loans to first-time buyers jumping almost 2 per cent in the month, the figures from the ABS show.