The majority of banks have increased interest rates on new investment loans and existing investment loans, and the increase in interest rates on existing investment loans is considered to be nothing more than price gouging, at their customers expense.

Australia Prudential Regulation Authority (APRA) has gone to the banks and said we need to cool the property market, so we want you to limit your lending for investment property to 10% of your book. Whether we agree with this or not, it is a directive to reduce new lending.

Any fair minded person would then think, increasing lending on new loans would lower the demand for new Investment Lending, however I fail to see how increasing the interest rate on existing Investment Loans will reduce new borrowing.

I have sought answers from the banks on why they have increased the interest rate on existing Investment Loans by between 0.27%  & 0.37%, and the only answer I have been given is that APRA have told us to do this.

APRA has not instructed the banks to increase interest rates on existing Investment Loans, they have only requested banks to limit their lending for Investment Property to 10% of their book.

It is nothing more than price gouging at the expense of their customers, and if any bank can explain to me that it is any different than a price gouge, I would love to hear from them, and I will pass their response on in this column.

John can be contacted on 0749722081 or 0410433919. or email him at jwhitten@ihl.net.au or net www.ihl.net.au. John Whitten is a credit representative (CRN 399796) of BLASSA Pty Ltd (Australian Credit Licence No 391237).