We all know that in recent years lending restrictions have tightened, and this year they got even tighter for property investors.

Why? Well, the Australian Prudential Regulation Authority (APRA) – Australia’s financial services industry regulator – has cracked down, introducing supervisory measures on lenders to “reinforce sound residential mortgage lending practices”, in its words.

In March APRA told lenders they wanted interest-only (IO) lending restricted to 30% of new loans, among other advice, and since then we’ve seen banks embark on a whole range of measures to deter investors and de-risk their portfolios.

This has gone beyond just restricting new IO loans, with the banks taking it further to crackdown on existing investment loans too.

What are the changes?

It seems there is a new lending restriction introduced almost every week – or at least every month – at the moment.

It’s now harder to get approval for an investment loan, with the most recent change being increasing loan-to-value ratios (LVRs) for some lenders.

This month smaller lenders including MyState and Newcastle Permanent announced they were introducing higher LVRs, with the deposit required increasing from 30% to 40%.

So if you were an investor buying a $400,000 property you’d need $160,000 for a deposit.

Serviceability requirements are also more stringent, with loan-to-income ratios being lowered.

CUA even stopped lending to investors full stop after the new APRA regulations were announced in March.

Then there are the changes being enforced for those already with investor loans, with IO rates increasing, seemingly with the intention of pushing investors to towards principal and interest (P&I) repayments.

The differential between interest rates for IO and P&I loans is now in the vicinity of 50 to 60 basis points.

In many cases the move away from IO lending has also meant lenders won’t extend an IO period beyond the average five-year term, which means investors must shop around or start paying P&I.

What impact are the changes having?

The crackdown on investor lending is obviously designed to stop – or at least slow – investor lending.

But is it?

While some have been quite dramatic in their assessment of the impact the changes will have on the investor market, even predicting the ‘end of property investor lending’, so far it doesn’t seem as though investors have exactly disappeared.

Investor lending has cooled with figures from the Australian Bureau of Statistics showing a drop in the value of investor loans in April and May, but in June it did rise again by 1.6%, the biggest percentage increase since January.

The year-on-year increase was 5.7%, down from 8% in May, which does indicate a slowing of investor lending growth, however, and it is expected the full impact is yet to be seen.

Indeed, a recent Investor Survey by Mortgage Choice also found 42% of property investors are shelving – or at least rethinking – plans to buy due to tougher lending conditions, up from 33% on the previous year.

Certainly those that are highly geared will have trouble getting finance approval to buying further properties, coping with increasing rates and being able to fund greater repayments due to a likely requirement to switch to P&I, which may even cause them to sell.

But while there are some investors with risky portfolios, others – with balanced portfolios – will cope with the changes just fine, and will still be able to grow their portfolios.

What will happen going forward?

We don’t have a crystal ball to tell you. There could be further restrictions – although there isn’t much left to do – or perhaps restrictions will be eased in time, although it isn’t likely to be anytime soon.

The experts assure us that there are lenders still keen for the business of responsible investors, so don’t give up on property investment.

There are still lots of opportunities out there, and plenty of growth to come in prices, and we expect investors will always continue to be active.

And don’t forget how a depreciation schedule can help you improve your cash flow if your lender has recently upped your interest rate.