Commonwealth Bank clamps down on property investor refinancings

The Australian 12:00am February 9, 2017

Michael Roddan

Commonwealth Bank will be turning away property investor customers of rival banks wanting to refinance their loan, in a development likely to send shivers through the rest of the major lenders as scrutiny over fast-paced growth in investor lending reignites.

A day after CBA’s West Australian unit Bankwest clamped down on property investor loans, the nation’s largest bank has told mortgage brokers it will be suspending inward refinancing for property investor loans and reducing the bank’s investment property lending package discount.

Because of the moves, CBA’s $1250 rebate on investment loan refinancing will also be scrapped.

CBA controls about a quarter of the housing loan market but about one in three investor loans. The bank has $137.2 billion worth of investor loans on its books. Westpac has just over $142bn worth of investor loans.

While CBA has not exceeded prudential regulator APRA’s annual growth limit of 10 per cent on investment lending, the moves suggest the lender may be close to breaching it.

Due to the freeze only affecting inward refinancing, it is understood customers who already have a CBA loan will still be able to refinance.

The APRA “speed limit” on investor lending was introduced in 2014 to pull back rampant investor lending and surging house prices in the capital cities. After two Reserve Bank rate cuts and the failure of Labor to gain office on the back of a pledge to slash negative gearing tax breaks, there has been a strong revival in the rate of investor lending in recent months.

According to the most recent APRA data, in December CBA’s investment portfolio was growing 35 per cent faster than the entire system, which itself was growing at an annualised rate of 10.1 per cent.

CBA’s investor portfolio grew at 7.2 per cent in the year to December, well above Westpac’s 5.1 per cent rate and NAB’s 4.3 per cent growth.

ANZ’s shrunk 1.7 per cent over the year.

Investor lending growth, which was continually rising at an annual rate of more than 10 per cent until September 2015, recently slowed to as low as 4.5 per cent in August last year, following APRA’s crackdown.

CBA said in the note sent to mortgage brokers that it needed to keep its “commitments”.

“We are committed to consistently delivering the best customer experience for home buyers, upholding the highest level of professional standards and meeting our responsible lending and regulatory obligations,” the bank said.

The developments come amid an industry-wide move to increase rates on investor loans and other products since the election of Donald Trump as US President, which has coincided with a surge in bond yields.