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Banks have been raising interest rates for investment loans. This doesn’t seem fair for us property investors. Some opportunistic investors are even lying to the bank to avoid the rises by claiming that the property is for them to live in! But you don’t need to resort to these measures.

You’re about to find out why banks are increasing rates. And how this information can help you avoid investing in areas that are at the top of the market – and pay less interest on your investment mortgage, despite the rising interest rates.

Banks limiting the amount they lend for residential property investment. Why?

It comes down to supply and demand. Any lender governed by the Australian Prudential Regulation Authority (APRA) is being instructed to drastically reduce the amount they are lending for residential property investment.

Why have ARPA reduced lending for residential property investment?

The government is in fear that property prices are rising unsustainably quickly and that this could cause a considerable correction in the property market which may lead to further economic issues.

Is this price surge happening all over Australia?

No. The main areas that are of concern are the more established areas of Melbourne and most of Sydney.

So what does this tell you if you are looking to invest?

Consider areas that are not deemed to be at the top of the market – these will be less of a concern to the regulators.

Look for areas where the population has been growing however property prices haven’t over a few years. A good sign of this is a steady increase in rent over this time period as it won’t be long before there is a greater percentage of people compared to properties.

Couple this with a scarcity of land and available properties and you give yourself the best chance of organic capital growth. It pays to do your research and learn a few useful tips to find the best investment property.

Are there any ways to avoid paying the increased interest on investment mortgages?

Seek the help of a good finance broker as they will scour the market for not only the best interest rate but what is going to be the best finance product to suit your circumstances.

Keep in mind that you have more options to get a loan than the big banks – smaller lenders are aware of this situation and want your business.

This means more choices for you to get the best rates and mortgage. So let an expert do the research for you.

Line up your darts

Now you know why banks have been raising interest rates for investment loans. You know how to identify areas that are good to both target and avoid – and pay less interest on investment mortgages. All without lying to the bank.

With these darts lined up, now could be a great time to hone in on your first investment property.

Happy investing!

Cheers, Nick
P.S. Contact me if you’d like any more information about any of these tips – or would like to check in with us about an area you’re thinking of buying a property.

Photo credit: Flickr – Andy Wetherill

Nick Holden

Nick Holden is the Founder of Simple Property Investment and an insured, qualified Property Investment Advisor under the ASPIRE Network industry body. He is a Licensed Real Estate Agent, holds a Diploma of Financial Services (Financial Planning) and Cert IV Financial Services (Finance and Mortgage Broking). As there is no 'one size fits all' with property investment, he is on a mission to help ordinary Australians create wealth for their futures with personalised strategies and advice.