It didn't make the headlines but there was some good news for property investors last week. The Reserve Bank have "delayed" the introduction of a new rule which would force banks to charge property investors with 5 or more rental properties a higher interest rate.
For most the mere suggestion of this may come as a surprise since it went largely unnoticed when it was first reported earlier in the year.
As with many ideas that have been suggested to reduce the risk of a housing bubble the detail of this one had not been entirely thought out. After all there are a number of questions which must be raised.
- Who would decide whether a property was a rental or not?
- Does your bach which is occasionally rented count?
- What about a rental property that family is living in?
- And then we have to consider how the trading bank's would report this to the Reserve Bank and whether one Bank may view this differently to another?
Which brings me to my next point.
Those of your with three or more rental properties may be aware that banks already treat investors with multiple properties differently to standard private customers or those with just one or two properties. Some of the common restrictions that I see banks imposing are...
- LVR restrictions for subsequent properties (sometimes to as low as 50% LVR)
- Being assigned a Business Banking Manager to more thoroughly cover the bank's lending position
- Loan application fees being charged
- A reduction in interest rate discounts and cash back offers
As Mortgage Brokers we ensure that all clients are getting the best deal for them, not just for the bank they are borrowing from. Sometimes this will mean that an investor with multiple properties may be best to split their lending between more than one lender. This is especially relevant if there are different classes of property, such as apartments and town houses along with standard residential dwellings.
We're pleased that the Reserve Bank have decided not to impose these restrictions at this time and we hope that they do not try to restrict landlords in the future. However if these rules are imposed later in the year or next year then it will be more important than ever to have a specialist in Home Loan's ensuring that you are getting the best deal to suit your situation... it could save you thousands.
See an article covering some of the detail on stuff.co.nz
As always, if you would like professional advice tailored to your situation, send us an email.