NAB lifts LVR cap for investor IO lending

NAB has informed brokers that it will be increasing the maximum loan-to-value ratio (LVR) for investment home loans with interest-only (IO) terms from 80 per cent to 90 per cent.

The changes will be effective for new applications submitted from Monday, 7 September.

“We continually review and adjust our policies to respond to customer demand and the competitive marketplace," a NAB spokesperson told Mortgage Business. 

“We have detailed conversations with all our customers and take into account a range of factors when assessing any home loan application to ensure customers are able to appropriately repay their loan, both today and in the future.”

NAB’s credit policy changes come just weeks after the major bank announced rate reductions of up to 15 bps across its investor offering, which included an 11 bps cut to investor loans with IO terms.

Following NAB’s rate changes, comparison website Canstar’s finance analyst, Steve Mickenbecker, said lenders are looking to expand their share of the investor market.

“The housing market has been in the doldrums and new lending to investors in particular is even lagging the owner-occupied market, leaving lenders competing hard for the quality business that is available,” Mr Mickenbecker said.

“With new investment demand flat, the race is on for market share of the refinance market, and investors are a tried and tested group being targeted by lenders.”

NAB has continued to lose ground in the investor space in recent months, with the latest APRA data revealing that the major bank’s investment portfolio contracted by a further $1.1 billion in July, from $107.1 billion in June to $106 billion.

Over the course of the 2020 calendar, NAB’s investment portfolio has contracted by a cumulative $4.5 billion, from $110.5 billion as at 31 December 2019.

[Related: Big four diverge following COVID-induced lending boost]