Reserve Bank comes up with new definition for property investors
The central bank says it is consulting on “a new asset class treatment for mortgage loans to residential property investors within its capital adequacy requirements.”
It plans to amend existing rules by requiring all locally incorporated banks to include residential property investment mortgage loans in a specific asset sub-class, and hold appropriate regulatory capital for those loans.
While it doesn’t talk about the impact on investors of the proposed new rule it is likely to mean interest rates for investors will rise above those of standard residential, owner-occupied homes.
Previously the Reserve Bank argued property investors were those with five or more investments. However, the trading banks opposed this definition.
Now the bank is now consulting on three possible alternative ways to define loans to residential property investors:
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