LVRs drop as CommBank continues to tighten investment lending criteria
Article by Kelly Emmerton
The Commonwealth Bank has made further changes to its lending criteria for property investors, this time reducing the maximum Loan-to-Value on investment loans.
CommBank, one of Australia’s largest lenders, announced it was reducing the maximum Loan-to-Value ratio (LVR) to 90% for property investors looking to borrow funds. That means investors will need at least a 10% deposit when shopping for property, whereas they could previously borrow with just a 5% deposit.
Dan Huggins, Executive General Manager Home Buying at CommBank said, “We are constantly reviewing our home loan portfolio. Today’s change will enable us to meet our customers’ needs, while further strengthening our high quality home loan business and ensuring we continue to meet our responsible lending and regulatory obligations.”
The LVR reduction is the most recent in a series of changes to the Commonwealth Bank’s investment lending criteria, which has been steadily tightening throughout 2017.
CBA first announced it would cease lending to investors looking to refinance an existing mortgage - a move also made by its subsidiary, Bankwest - and then followed that up with a 12 bp rate increase on investment loans.
The changes are designed to slow investment lending, in order to meet APRA’s 10% investor portfolio growth limit, set out in 2014. It seems that after a prolonged period of low interest rates and a booming property market, banks are now keen to pump the brakes on new lending.
CommBank also said in its statement that it expected the changes to affect only a small percentage of investor loan applications, and that every application was assessed on a case-by-case basis.
The changes are effective from 13 March, 2017 and don’t affect owner-occupiers looking to borrow.
Although CBA is restricting lending, investors looking for a home loan to get into the property market can still find plenty of options with low rates and generous LVR limits. If you’re one of them, check out our home loan search tool to find a mortgage that suits your budget.