The Reserve Bank has delayed until December the introduction of a change in treatment of property investors. They have proposed a change in the way a bank can classify a client who holds more than five rental houses.
This will change the interest rates available to these clients and the amount of leverage which may be possible. The details may change as the central bank considers some of the issues raised in submissions by the banks and others.
The draft rule appears to have the following aspects
1. The number of houses counted will include those in related ownership structures, ie LTC and trusts.
2. This change in classification may lead to further costs for the banks hence possible higher interest rates
3. Properties with other banks are included in the count, so 3 with bank A and 3 with Bank B, would mean 6.
It may be a challenge for a bank to capture the details of properties held with other banks. This may mean that a bank may consider higher rates only at a point which will trigger a disclosure of personal information, such as a request for a top up or further borrowings for additional purchases.
