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Bank announces raft of changes to investor lending

by Reporter6 minute read

A non-major bank has stopped accepting new investor refinance applications, increased rates on investment P&I loans and interest-only loans, and changed the LVR for investor mortgages.

The first set of changes, which came into effect yesterday, mean that AMP Bank will no longer accept new refinance applications for investor property lending.

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It is the latest bank to stop accepting such applications following similar moves from Bankwest and Commonwealth Bank

AMP Bank has also announced that variable interest rates on principal and interest (P&I) investor property loans will increase by 25 basis points for new customers.


This means that the AMP Bank Investment Basic variable loan (P&I) has increased to 4.56 per cent per annum while the AMP Bank Investment Professional Package variable loan (P&I) has increased to 4.59 per cent per annum.

Further, new investor property loans will require a loan-to-value ratio (LVR) below 70 per cent. 

The first set of changes are designed to "manage AMP Bank’s regulatory obligations for investor property lending, which has increased in demand from late 2016 and has been further escalated by competitor moves".

Changes to credit policy have also been announced, in response to "an increase in interest-only applications since late 2016".

In a bid to "protect customers and shareholders from what can be a higher-risk mortgage strategy", AMP Bank has also increased variable interest rates for new interest-only customers by 30 basis points. 

This means that the new interest rates for AMP Bank Investment Basic and AMP Bank Investment Professional Package (interest only) are now 4.61 and 4.64 per cent, respectively.

The changes do not impact existing customers and there is no change for new owner-occupied principal and interest loans. 

'Prudently managing risk'

Earlier this month, the non-major lender increased the AMP Bank Investment Basic Variable Loan by 10 basis points to 4.31 per cent and the AMP Bank Investment Professional Package variable loan by 20 basis points to 4.34 per cent for loans above $750,000.

The bank announced the additional changes to its investor lending and credit policies yesterday "in response to recent changes to consumer behaviour and competitor activity in the property market".

Sally Bruce, group executive of AMP Bank, commented: “We actively manage our credit policies to ensure we prudently manage risk and align with regulatory requirements. 

“With sustained high levels of activity in the property market in 2017, we will continue to closely monitor developments and put measures in place to control and manage the future growth of our investment property portfolio,” she said.

The changes were foreshadowed earlier this month when AMP CEO Craig Meller told The Adviser that "when large players take action to slow their book, unless AMP bank takes action accordingly it could blow our business up with very significant increases in volumes. So, as we see the market environment changing we'll be adjusting our approach in response to what we're seeing in the marketplace more generally”.

The bank's full-year financial report, which was released earlier this month, reveals that owner-occupied loans made up 74 per cent of the mortgage portfolio at 31 December 2016, while investment property loans were 26 per cent.

The move comes less than two years after the bank cut back on investor lending due to concerns it would breach the regulator's 10 per cent speedbump. 

[Related: Big four bank hungry for investor loans]

Bank announces raft of changes to investor lending
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