Bridging the finance gap

Where previously they would have been willing to back a deal, now it is becoming much more common for applications to be declined.

That is in part due to the Reserve Bank’s crackdown on loan-to-value restrictions (LVRs).

It is nearly impossible for mainstream banks to lend more than 60% of an investment property’s value, unless the property is a new build or an investor is conducting remediation work.

Glenn Stevenson, head of mortgages at ANZ, says the bank is still lending to investors but the LVR rules have drawn a line in the sand, ruling out a chunk of the market.

He says frontline staff have noticed a big impact on the investor market.

In addition to that, there are requirements for banks to hold increasing amounts of capital against residential investment lending.

And this, along with rising interest rates, means borrowing is more expensive for those who have enough equity to get across the line, Stevenson says.

“Gone are the days of discounts in line with what an owner-occupier might be able to get.”

So what are the best options for investors trying to find a loan when banks are bound by LVR rules and increasing capital requirements?

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