the adviser logo

CUA 'phases' back into investor loans, cuts rates

by Reporter11 minute read

CUA has continued its “phased” return to investor lending by dropping interest rates for fixed rate investor home loans.

In April, Credit Union Australia announced that it would stop accepting new investor lending applications, including applicants refinancing from other financial institutions, until further notice.

Chief operating officer of member services Andy Rigg explained that the changes came following a sharp increase in investor lending volumes.

He commented at the time: “We have been closely monitoring our year-on-year investor lending balance growth to ensure that we continue to lend prudently while remaining within the 10 per cent regulatory growth benchmark.


“We have observed an increase in new investor applications, particularly in response to some of the actions taken by other lenders to slow their investor growth. 

“In response to the continued growth in our investor lending and forward projections of this growth, we’ve taken the decision that we need to temporarily pause new investor lending.”

However, in July of this year, the lender quietly began accepting a “small number” of investor loan applications from existing CUA members that had been with the credit union for 12 months or more.

Earlier this month, the lender removed this requirement and opened up fixed rate investor lending to new-to-CUA investor loan applications, where the application was accompanied by an owner-occupied loan application.

CUA has now announced that it has dropped fixed rate investor interest rates for new and existing members by between 10 and 20 basis points.

The rate changes mean that the basic fixed rate investor loans now range from 4.34 per cent per annum (p.a.) to 4.74 per cent p.a. (for one-year to five-year terms, respectively).

This equates to a comparison rate of 5.32 per cent p.a. for one-year basic fixed rates and 5.16 p.a. for five-year basic fixed rates.

The new rates will apply to “all applicable CUA fixed rate investor home loans” approved from 19 September.

CUA chief executive officer Rob Goudswaard commented: “Our investor growth has slowed to a level where we were recently able to begin a limited, phased return to investment lending.

“These changes are a further step in CUA’s phased return to investor lending.”

He further said: “CUA will continue to closely monitor our lending volumes to ensure we remain within the regulatory benchmark of 10 per cent year-on-year investor balance growth and the 30 per cent limit on interest-only lending.”

The bank also revealed this week that its loan volumes were down by 4 per cent in the 2017 financial year, after being “impacted by extremely competitive market conditions” in the first half of the year.

Unsurprisingly, given the halt in investor lending, around 90 per cent of the total loans written were for owner-occupiers, accounting for $2.53 billion of new lending.

In total, the credit union settled $2.81 billion of loans in the first half of the year, with $1.64 billion of it coming in the six months to 30 June 2017.

Brokers accounted for 41 per cent of new mortgage lending during FY17, 1 per cent up on the prior comparative period.

In all, the credit union’s loans under management were up by 3 per cent to $11.53 billion.

[Related: Mutual lender halts investor lending]