Home loan interest rates are likely to keep favouring owner-occupier borrowers over property investors under finalised changes to bank capital rules.
The banking regulator APRA late this afternoon released its new bank capital framework, which it has described as “more risk sensitive”.
As a result, the current higher interest rates facing property investors, borrowers with small deposits or little equity, and those on interest-only loans are likely to remain, if not increase.
However, because a very similar draft was flagged a year ago, it is understood APRA is not expecting big shifts in market pricing for mortgages and other loans as a result of the final changes.
While the size of a loan relative to the bank’s valuation of the property (loan to valuation ratio, or LVR) was previously the main measure of risk considered by the regulator, APRA will now also differentiate between owner-occupier and investor loans, as well as principal and interest versus interest-only loans, with the latter in both cases considered riskier.
