ANZ bank raises interest rates on investor home loans

[SYDNEY] Australia and New Zealand Banking Group (ANZ) said on Thursday it will raise interest rates on loans for homes bought for investment purposes from Monday, days after a regulator set a July 2016 deadline for banks to lift their cash reserves.

ANZ became the first lender to officially announce a rate hike after the Australian Prudential Regulatory Authority (APRA) on Monday said banks should have cash reserves equal to 25 per cent of mortgage books, up from 16 per cent now.

The move also follows increasingly stern warnings from regulators that tighter mortgage standards are needed to prevent a housing bubble in Sydney from destabilising the financial system. "The decision to raise interest rates for residential investment lending has been difficult but necessary in the current environment," ANZ Chief Executive Officer Mark Whelan said in a statement. "It allows us to balance the mix of our lending between owner-occupied and investment lending as well as the impact of changing market conditions." Effective Monday, ANZ's variable residential investment property loan index rate will rise by 0.27 percentage points to 5.65 per cent. Fixed rates for new investor home loans will also increase by up to 0.30 percentage points, it added.

Meanwhile, fixed rates for new owner-occupied home lending will be reduced by up to 0.40 percentage points, the lender said.

ANZ said it has taken other steps to slow investor property lending, including stricter criteria to approve investor loans, reducing interest rate discounts and raising deposits on investor loans to at least 10 per cent.

REUTERS