White-label funder increases investor rates

The increase will apply to both new and existing investor loans for P&I and interest-only customers.

An Advantedge spokesperson said: "On Friday 21 April 2017, Advantedge will increase all variable rate investor loans by 0.22 per cent p.a. This change will apply for new and existing residential investor principal and interest, and interest only loans.

"Advantedge remains committed to delivering a competitive offer, and a great customer and broker experience."

The amends are not related to APRA's recent announcement about mortgage lending changes, but it does follow on from similar rate rises made by a raft of lenders in recent days.

Investor demand in focus

The moves follow a spate of increases to investment loans in recent weeks, as banks increase their interest rates for investors in a bid to remain under APRA's 10 per cent speed limit, respond to “increasing funding costs” and mitigate any potential risks in lending to investors.

Bendigo and Adelaide Bank managing director Mike Hirst said the bank’s adjustments reflect the requirement to meet regulators' expectations in dampening demand for investor lending and reflects the bank’s view that recent ultra-competitive mortgage pricing needs to return to levels that better reflect the current market funding and capital costs.

“As has been well telegraphed to all Australian authorised deposit taking institutions, there is an expectation that as lenders, we must manage within the regulator’s 10 per cent growth speed limit for investor loans,” Mr Hirst said.

“When setting these rates we’ve tried to carefully balance the interests of our mortgage customers, those who earn money through deposits and those who invest in our bank.”

According to the latest volume of JP Morgan's Australian Mortgage Industry Report, new capital requirements under Basel 4 could see property investors hit by rake hikes of up to 3 per cent.

Speaking in Sydney last month, JP Morgan analyst Scott Manning said: "We have seen ongoing repricing of the back book and also some change in discounting behaviour. But one of the things that has also come through is the divergence in repricing behaviour.

“The mortgage repricing against the SVR product is around 30 basis points. But investor mortgages and, in some cases, interest-only loans have been twice that rate at 60 basis points.”

With risk weights for investor loans set to increase significantly, JP Morgan expects ongoing significant dispersion in pricing for mortgage products to continue.

“You could be looking at pricing responses here anywhere between 1.5 per cent to 3 per cent, which is quite meaningful when you consider that mortgage rates at the moment are around 4.5 per cent,” Mr Manning said.

[Related: Westpac announces changes to variable interest rates]