Two of Australia's largest banks jacked up mortgage rates for speculative buyers on Friday as part of an intensifying campaign by regulators to hose down a heated housing market. The out-of-cycle hikes come at a time when the central bank held rates steady for an eighth straight month in March, citing the "build-up of risks" in home prices and household debt.
Speculation is high that the main watchdog, the Australian Prudential Regulation Authority (APRA), is about to tighten the screw on bank lending, adding to rules imposed in 2015. Treasurer Scott Morrison all but confirmed that steps were afoot in a news conference on Friday, saying he and the regulators were "concerned" about the resurgence in investment borrowing seen in the last few months.
"The next step is to make any announcements they think necessary to address that issue," said Morrison. Already the banks have responded to the pressure by hiking rates on investment loans, and particularly interest-only loans favoured by speculators. ANZ on Friday raised its variable interest rates on investor loans by 25 basis points (bps) to 5.85 percent, effective March 31.
It lifted rates on interest-only loans by 11 basis points to 5.85 percent for investors and by 20 bps to 5.25 percent for owner-occupiers. The changes are effective April 22. Variable interest rates for owner-occupiers who repay both principal and interest remain unchanged at 5.25 percent. Commonwealth Bank of Australia said it was raising rates on interest-only and investment home loans by between 24 and 26 bps, effective May 8.
Last week, it demanded investors stump up a larger deposit for new loans. "These changes reflect a need to closely manage our regulatory obligations, our portfolio risk and the competitive environment," Group Executive Fred Ohlsson said in a statement. Last week, National Australia Bank and Westpac Banking Corp made similar hikes, citing regulations, higher funding costs and intense competition.
Regulators are increasingly worried that home prices in Sydney and Melbourne - Australia's two biggest cities - may be in a bubble territory. Latest government data showed home prices rose 4.1 percent in the December quarter, from the previous quarter, with Sydney up a red-hot 5.2 percent. The pace has quickened even further this year. Figures from property consultant CoreLogic showed prices were growing at an annual 19 percent in Sydney, while gains across the five capital cities amounted to 12.7 percent.
Much of that fever has been fuelled by borrowing for investment properties, driving household debt up to a record 180 percent of disposable income.
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