Following moves last week by the ANZ and CBA to hike mortgage rates on investor loans by 27 basis points, the NAB has today announced it will hike rates on interest-only loans by 29 basis points, a move also designed to slow down investor housing lending growth.
Significant growth in investor-only loans has been raising concern among financial regulators as investors pile into interest-only loans to take advantage of ever rising home prices. APRA statistics for the March 2015 quarter found interest-only loans made up 42.3 per cent of all new loans issued.
While the move by NAB will target both owner occupiers and investors using interest-only loans, NAB said interest-only loans were “predominant structure for investors.”
Westpac has today announced a $750 million corporate note issue to help bolster capital reserves as news spread that Westpac had last week put in place a hiring freeze for all non-critical roles, initially said to last three months.
According to a Herald Sun article, Westpac was unable to follow ANZ and CBA, jacking up investor only loans due to a deficiency in its computer systems. It is understood Westpac technical staff are checking back-office systems to ensure owner-occupier and investor customer information is correct.
A Westpac spokesperson told News Limited, “Given we haven’t had differential pricing across the mortgage book for a number of years, if this was to be introduced we must ensure a smooth transition for affected customers,”
This could suggest a rate hike is still coming for property investors financed through Westpac.
» Will Westpac follow the pack and hike investment home loan rates? Computer says ‘not yet’ – The Herald Sun, 27th July 2015.
» Westpac confirms three-month hiring freeze – Business Insider Australia, 27th July 2015.
» NAB raises rates on interest-only home loans – Sydney Morning Herald, 27th July 2015.
Ha!
Computer issues at a big 4. Last time this stuff was going on was in the depths of the GFC: We were told it was a technical issue, when the reality was (and the fact that it hasn’t occurred since) it was a LIQUIDITY issue.
Are these gentle rate rises enough to burst the dam wall? Only time will tell: But it was rising rates in the USA that triggered their sub-prime melt down.
Interesting times.
I am really depressed about this country. The only game in the town now is HOUSING. The definition of advanced economies is that people should be able to provide for themselves and their families their BASIC NEEDS, which are food, clothing , shelter, education, health services…etc. Australia by that definition does not fall into this category. How come a massive remote island with a tiny population like Australia have hundreds of thousands homeless, 12% under poverty line, the most expensive lands in the world, even a large percentage of the working population hardly get by? Really people should consider Australia is officially a third world poor country or at least on its way to.
While it would be too early for liquidity problems, computer issues did seem a little too convenient for me. The NAB plan to up rates for new loans on the 10th August (in line with ANZ & CBA) and for existing loans a month later on the 20th September.
If Westpac chose 20th September to put up rates, it would have 4 and a bit weeks to get their computer issues in check. They could make an announcement and no one needed to know. For all we know, the NAB probably has the same problem and hence is differentiating its customers by product – interest-only.
Westpac have the largest portion of investor loans of any of the banks. It sounds to me like APRA has given instructions to increase investor lending rates, and the Wespac is using their outdated customer database as an excuse to delay the inevitable.
For the sake of their customers we hope the banks have not packaged and on sold the loans as mortgage backed securities (MBSs & CDOs). As in the US sub-prime crises the mortgage paperwork became difficult to find and in some cases impossible.
http://hosted.ap.org/specials/interactives/_business/mortgage_process/index.html?SITE=AP
I believe it was the NAB who last spun us this computer glitch story a few years ago, wasnt it? Suspected by many to be a coverup for a liquidity problem. some of the big four have pulled in huge loans after the GFC from the US Fed to save themselves.
“ever rising house prices” – give me a break. Every major financial crash in history has proven that they can, and will crash, if market forces are allowed to play out within reason. What we have in our country is ever arrogant housing buyers with ever rising delusions of grandeur and a political class that has supported it. I suggest the federal Treasurer, Joe Hockey is selling his portfolio in housing off, for a reason.
ROTFL! Yep it’s called outsourcing. I deal with outsource IT companies all of the time and you know what? You get what you pay for.
No design ability, no coding ability, no foresight just garbage. You see the outsource companies have a bureaucratic structure whereby the first layer is technical staff followed quickly by a management layer. The culture within Indian outsource companies is move up or move out. So the pressure is upon the “graduate IT” staff, who seem to have lower yardsticks than our own Australian Unis, to move up quickly like an MLM (Multi-Level Marketing) scheme. That coupled with the societal pressure of prestige of a management job ensures that the only IT staff you get are wave after wave of graduates.
I remember when the Virgin Australia flight booking systems went down and some dumb PR person came out and said “Australians should get used to this as we move into the internet age.” Uuuuh, no. Google and Amazon don’t seem to have these issues.
So expect more of this type of scenario as we move forward and cheaply built IT systems replace old-age but stable systems. Outdated isn’t the issue, dimwittedness, cheapness and lack of foresight is.
@ 7. Estupidio, what makes you think overseas outsourcing companies are any different to Australian ones? They arent. Technically unknowledgeable managers are endemic here, they all seem to be failed technicians who are promoted rather than sacked.
The effects of the crashing Chinese Stock market will stem the flow of black money into our RE markets. The RBA will no doubt be relieved until the slow down triggers a reversal of ever increasing bubble prices. In effect slightly increasing interest rates on investment properties is like re-arranging the deck chairs on the Titanic after it hit the iceberg. The net result will be ZERO interest rates sooner than later.
NAB said interest-only loans were “predominant structure for investors.”
Sorry NAB you need to replace the word investors with speculators.
Absolutely Bubby. If you’re not looking to pay down the debt, you’re just speculating that the price will go up.
@ 8,Titty Surprise, ype as the old adage goes “People rise to the level of their incompetence”.