ANZ has joined Bankwest in tightening lending conditions for investors. Credit:Bloomberg CLSA banking analyst Brian Johnson said it could lead to a period of no increases in house prices. National house prices rose more than 10 per cent last led by Sydney and Melbourne. "It probably means that we just have what you've seen in past cycles, which is that Australian prices tend to rocket, and then do nothing for quite an extended period of time," he said. "The fact that investors probably can't borrow as much, and they have to pay a higher rate relative to an owner-occupier, would suggest at the edges that the capacity to compete on the basis of price goes down a little." CoreLogic RP Data's head of research, Tim Lawless, said that 60 per cent of new loans in NSW were to investors, so a likely slowdown in investor borrowing would dampen price growth in Sydney. He predicted prices would continue to rise, but below 10 per cent. "Obviously if you're an investor, it probably means that getting a loan might be a bit more challenging," Mr Lawless said.

Bank of America Merrill Lynch economist Saul Eslake said the banks' steps may lower demand from investors, but would be less effective than the more prescriptive limits on borrowers imposed in New Zealand, where Auckland's market is similar to Sydney's. "At the margin it may dampen investor demand and it's worth trying," Mr Eslake said. "It's clearly not as bold as the kind of action that's being taken on the other side of the Tasman." Not everyone believes the measures will affect the market. An economist at Fairfax Media-owned Domain, Andrew Wilson, said he did not think it would affect prices. ANZ Bank said it would no longer offer discount interest rates to new property investors who did not already have a mortgage over their own home with the bank. National Australia Bank and Commonwealth Bank have also reduced the discounts offered to new investor borrowers. CBA also told mortgage brokers last week it would scrap a $1,000 rebate for new investor borrowers. Westpac has not changed its loan-to-valuation rules or announced changes to pricing, but this month it said it would apply tougher tests to new property investor borrowers when assessing how they would cope with higher interest rates. It is tightening its lending criteria for "non-resident" home lending, suggesting foreigners will find it harder to borrow. An ANZ spokesman said the bank had not changed its loan-to-valuation ratio for investor loans but was "keeping a close eye on how the market develops."

The bank's change in discounting, effective immediately, means the bank will no longer offer discounts off its advertised rate, which is 5.38 per cent. "For customers with investor-only lending, ANZ will only offer advertised rates with no discretionary pricing available," the spokesman said. "For customers with existing owner occupier lending, ANZ will continue to offer discretionary pricing on their investor loans." Bankwest's loan limits will mean that property investors will need to provide 20 per cent of the purchase price to receive the loan. The changes are in response to a demand from the Australian Prudential Regulation Authority for banks to slow the pace of housing investor credit growth below 10 per cent. Despite the rule being announced in December, investor credit has since accelerated year to 10.4 per cent in the year to March, the quickest pace since early 2008.

Latest numbers show ANZ, NAB, and Westpac were all growing faster than the threshold, and the lenders are under pressure to be under the cap by the second half of this year. The pace of growth prompted APRA chairman Wayne Byres to last week say he expected slower growth in the second half of year, adding that banks had had "long enough to revise their ambitions". A NAB spokesman said the bank supported APRA, and it been working closely with the regulator "to ensure our practices are aligned to its best practice guidelines." "There has been strong growth in investor lending across the industry and NAB fully supports measures to ensure the sustainability of the housing market," the spokesman said. A CBA spokesman said: "Commonwealth Bank takes a responsible and prudent approach to lending. We continuously review and monitor our loan portfolio across all segments, including investor home lending."

Bankwest, owned by CBA, said it will apply a maximum loan-to-value ratio of 80 per cent and has cut back on other special pricing deals for property investors. The bank claimed the moves were aimed to "ensure sustainable growth in the home loan investment sector to protect both investors and the home loan market". Loading The Reserve Bank of New Zealand has introduced LVR caps to lending in Auckland to attempt to cool hot property markets across the Tasman. APRA has indicated it will soon require the big banks to carry more capital against their mortgage books, in response to a recommendation from the financial system inquiry.