Modelling by Dixon Advisory has shown that property investors may not be able to have an investment portfolio unless they have funds in reserve for every year of their loans under APRA’s tighter lending standards.
Investors may have to set aside more capital to secure their loans or be priced out of the purchasing market.
The Australian Prudential Regulation Authority this week instructed the main four banks and Macquarie Group to hold billions of dollars in extra capital to cover mortgage loans, with the change potentially passed onto customers in higher borrowing costs.
The changes will have significant ramifications for some investors who could be priced out of the market, Dixon Advisory’s Nerida Cole told The Australian Financial Review.
The managing director of Dixon Advisory’s financial advice division suggests some investors will need a larger deposit to reduce their loan-to-value ratio or buy cheaper properties.
“For borrowers who are in a strong financial position, [and have a] particularly strong surplus cash flow and low debt levels, they may be able to acquire the property of their choice,” said Nerida Cole.