The big banks’ move to lift investment loan rates is bad news for families who’ve chosen to live in their “investment” property.
Thousands of Australians are reportedly repaying more than they need because they’ve not told their lender that they are now living in a property bought with an investment loan.
While interest rates for home owners are at very low levels, the big banks have in the past few weeks raised the rates they charge investors.
Those with variable mortgages over investment properties have been hit with higher mortgage interest rates as lenders respond to the regulator’s cap on investment lending to help take some heat out of the runaway property markets in Melbourne and Sydney.
Lenders are reporting that they have been fielding calls from owner-occupiers with investment loans. The lenders have been re-classifying these loans as owner-occupier mortgages which have lower interest rates.
Lenders have also been identifying from their records those customers living in their properties that have investment loans.
The typical scenario is where borrowers are now living in properties that they used to rent to tenants. There are likely to be many thousands more in this situation where their lenders are not aware they are now owner-occupiers.
These customers previously had little incentive to tell their lender they had moved into the home as the investor and owner-occupier rates of many lenders were the same.
Sam Boer, CBA’s general manager of broking, is reported in Mortgage Business as saying that that at its peak, CBA was seeing a couple of hundred requests a day, although that has now started to drop off.
“Just through our own data mining, we’ve found a lot of customers – and we’re talking in the tens of thousands – who are living in their investment properties. So we’ve been busily reclassifying them,” he told Mortgage Business.
“Usually the call comes in because they’ve noticed something has happened to their interest rate, so we talk them: ‘Are you living in the property?’ And they say: ‘Yes’, Boer says.
“Okay, they answer a few questions, they sign a declaration and then we switch it over and they’re happy with the world again. And so that’s a very simple and easy process,” he says.
St George Bank’s head of credit, Rob Love, told Mortgage Business the bank had had to implement new procedures for dealing with an influx of investors seeking to switch to an owner-occupier mortgage.