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Investors' portfolios predicted to grow

25 February 2015 James Mitchell & Huntley Mitchell

One of Australia’s fastest growing banks believes the low-rate environment will further encourage investors to continue growing their portfolios.

One of Australia’s fastest growing banks believes the low-rate environment will further encourage investors to continue growing their portfolios.

Sydney's booming property market just recorded its third weekend in a row with a preliminary auction clearance rate above 80 per cent.

Preliminary figures from CoreLogic RP Data showed an auction clearance rate of 87.8 per cent across 633 auction results.

Speaking to Residential Porperty Manager's sister publication Mortgage Business, ME Bank’s national broker manager, Stewart Saunders, said that with interest rates continuing to drop, it is “definitely becoming attractive” for investors to enter the market, adding that in some areas they are almost able to positively gear properties.

“I think the interest rate environment is driving more investors into the market and creating opportunities to grow their portfolios,” Mr Saunders said.

According to APRA banking statistics, ME Bank grew its investor loan book by 40.5 per cent last calendar year.

Mr Saunders said that while there has been uplift in lending to investors over the past 12 months, ME Bank has seen the overall market being “quite contained and growing in line with our general mortgage growth at the moment”.

In December, APRA announced that it would be “further increasing the level of supervisory oversight on mortgage lending” in a bid to “reinforce sound residential mortgage lending practices”.

The banking regulator said one of its “specific areas of prudential concern” is when lenders increase their investor lending by more than 10 per cent during a year.

While APRA said this does not necessarily indicate wrongdoing or warrant any action, it did state that investor growth above 10 per cent would be “an important risk indicator for APRA supervisors in considering the need for further action”.

Mr Saunders told Mortgage Business that it is important for APRA to have an overarching prudential view across the financial institutions to ensure stability in the financial markets and the wider Australian economy.

“It’s good that they are looking at some risks in the market and coming back to banks with feedback around those hotspots where they see some concern,” he said.

“We are comfortable with the approach they’ve taken and the way they are dealing with the market more generally.”

Mr Saunders added that ME Bank supports APRA’s investor lending measures and will work with the regulator on any areas that it can.

Investors' portfolios predicted to grow
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