A CRACKDOWN by the banking regulator could mean cheaper home loans for first home buyers.
The Australian Prudential Regulation Authority (APRA), which oversees the banks, has imposed new rules to slow the growth of lending to investors, which could mean a better deal for owner-occupiers, who are often first home buyers.
This means that people paying off the home they live in are likely to become the new prime customer of banks, Fairfax reports. This fiercer competition could lead to cheaper home loans for owner-occupiers than what is offered to investors.
First home owners are increasingly competing against investors for the same properties. March housing finance statistics showed investors accounted for 40 per cent of property sales.
The National Australia Bank is among the lenders that has offered a better deal to owner-occupiers, with a 0.15 per cent interest rate discount offered to people living in the home they are paying off.
APRA has imposed a cap to slow the growth of credit offered to investors to less than 10 per cent a year, in order to rein in the risk that loans will not be repaid.
It is yet to be seen how each bank will respond to the measure.
NAB’s Anthony Waldron told Fairfax that he believed more banks would offer “differentiated pricing” to comply with the new rules.
“Within a 10 per cent cap, I think you will see that play out more and more over the next few months, as we see people really try to grow their owner-occupied books and operate within the guidelines set out by the regulation,” he said.
However, Michael Rafferty, of the University of Sydney’s School of Business, said the banks’ change in priorities was more to do with mitigating risk than giving first home buyers a fair go.
“They’re not interested in the fairness of housing. It’s about who are the lowest risk borrowers,” Dr Rafferty toldnews.com.au.
He said APRA argued that owner-occupiers were more likely to repay their loans because they tended not to walk away from home ownership, while a person taking on more debt for a second or third home was a riskier proposition.
“People hang on to home ownership as long as they can: they stop going out, and stop buying cars … So the argument is being put that selling homes to new young couples to live in is considered a safer bet than an investor,” he said.
Dr Rafferty said there had been a significant change in the way Australians looked at the property market, which had made it increasingly difficult for younger people to buy their first home.
“We’ve allowed housing to become a form of saving, when it used to be seen principally as place to live in,” he said.
“As a consequence, you’ve got all these investors and all sorts of other people securing housing like they’re playing the stock market.
“A young person in their 20s trying to pay off their HECS debt is looking at the housing market and seeing it whizzing past. It’s changed housing in less than a generation and that’s a big concern.”
Dr Rafferty said unions were involved in securing affordable housing for their members in decades past, but now it was seen as a dilemma for individuals, or considered only a concern for people on welfare.
“Today, I don’t see any institutional champion for people wanting to change the direction (of housing affordability),” he said.
Despite the difficulties, Dr Rafferty said younger Australians should continue to pursue the dream of home ownership, because it had it had other social benefits, such as offering security of tenure in the one home and helping people support themselves in retirement.
Record-low official interest rates of 2 per cent continue to make property an attractive investment.
Investors have led unprecedented growth in Australian home loan approvals, which has led to an overheated property market, particularly in Melbourne and Sydney.
The amount of home lending grew 3.8 per cent to a record $31.3 billion in March, helped by a $12.9 billion surge in borrowing by investors.
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