National Australia Bank has become the third of the big four banks to tighten interest rates on investor loans in the past week, as the lenders seek to cool-down Australia's hot property market under regulatory pressure.
NAB said today it was increasing rates on its interest-only home loans and lines of credit by 29 basis points, responding to concerns about the pace of investor growth
The Australian Prudential Regulation Authority is forcing the big banks to stick to a speed limit of 10 per cent growth in their investor portfolios this year, following concerns that record-low interest rates were fuelling a speculative property bubble in parts of the country.
The move follows action by ANZ and CBA which lifted rates on mortgages for property investors by 27 basis points last week.
NAB said today that investor only loans are the predominate structure for investors, and over the last three years housing investment loans have grown 34 per cent, while the number of interest only loans has risen 44 per cent.
The Reserve Bank has trimmed official interest rates twice this year in a bid to speed up the economic transition away from the mining boom as business investment dries up, lowering the cash rate to its current record-low level of 2 per cent.
RP Data’s most recent figures showed annual house price growth across five capital cities lifted 10.5 per cent in the year to July.
“In an environment of record low interest rates, NAB believes it is important to encourage our customers to pay down their home loan," NAB group executive of personal banking Gavin Slater said.
"NAB is confident the steps we are taking are the right approach to further support responsible lending practices."
In May, ANZ, Commonwealth Bank and NAB moved to end discounts and special rebates on their investor only mortgage loans.
JP Morgan banking analyst Scott Manning said, after CBA increased its rates, that major bank measures to increase investor lending rates may also provide the scope for the RBA to reduce rates further to stimulate other pockets of the domestic economy outside of the ‘hot spot’ of investor lending
The RBA is balancing the need to depreciate the Australian dollar and stimulate the economy — by lowering interest rates — and the need to maintain long-term financial stability and contain bubble-like house price growth — namely by returning, at some point, to a normalised interest rate environment.
"The door may now be open for the RBA to reduce rates further," Mr Manning said.