Westpac, ANZ tighten investor mortgage lending as prices surge

Sydney

WESTPAC Banking Corp and Australia & New Zealand Banking Group Ltd (ANZ) are further tightening lending to investors in residential real estate amid efforts to cool the housing market.

Westpac, the largest lender to landlords, said in a statement on Wednesday that it will lend a maximum of 80 per cent of the value of a home to be rented out, down from 95 per cent.

ANZ Bank said that it cut the loan-to-value ratio to 90 per cent from 97 per cent, and will introduce an interest rate "floor" to ensure that borrowers can repay mortgages if borrowing costs rise.

The moves follow similar curbs by National Australia Bank Ltd last month after pressure from the regulator to limit the growth in lending to investors.

Home prices have surged 43 per cent in Sydney since May 2012 amid record low interest rates, fuelling concern of a property bubble in the nation's largest city.

The central bank said last year that investors were distorting the housing market, while the Australian Prudential Regulation Authority (APRA) in December urged lenders to limit investor home loan growth to 10 per cent a year.

APRA warned banks in May that it expected to see a moderation in investor lending in the second half of the year.

Landlords accounted for half of all new home loans in New South Wales state, of which Sydney is the capital, compared with 35 per cent in the rest of the country, Treasury officials told a parliamentary inquiry on home ownership on June 26.

National Australia Bank reduced its investor mortgage loan-to-value-ratio to 90 per cent on June 13, Melbourne-based spokesman Nick Higginbottom said on Wednesday.

Michael Hobbs, a Sydney-based spokesman for Commonwealth Bank of Australia, declined to comment.

From July 25, ANZ Bank will grant mortgages only to investors who are still able to service loans if rates rise to 7.25 per cent, compared with their current variable mortgage rate of 5.38 per cent.

Westpac, ANZ and National Australia Bank in May scaled back on interest-rate discounts that they offered to investors in residential real estate. BLOOMBERG