Banks Split on How Fast to Rewrite Investor Loan Rules — Non-Bank Lenders Offer Stability

Banks Are Moving at Different Speeds — and Investor Borrowers Are Caught in the Middle

Australia's mortgage brokers are navigating an increasingly inconsistent lending environment as major banks update investor serviceability rules at different speeds ahead of the federal government's negative gearing and capital gains tax reforms. The result: borrowers who qualified for investment property finance six months ago may now face unexpected rejections — or need to shop between lenders who haven't yet adjusted their models.

What Is Changing and Why

The federal government's proposed negative gearing reforms, which are now subject to a Senate inquiry, would restrict negative gearing benefits to newly built properties from 1 January 2027. In anticipation of this legislative change, several major lenders have already begun stripping negative gearing add-backs from their investor serviceability calculations.

Lenders who have acted early:

• Macquarie Bank moved first, removing negative gearing rental income add-backs from serviceability assessments
• Several second-tier banks followed with partial adjustments
• Some non-major lenders have implemented scenario-based assessments

Lenders who are still reviewing:

• Multiple big-four banks are still determining how and when to adjust
• Policy updates are arriving inconsistently, even within lender product teams

The Senate inquiry, announced this week, adds further uncertainty: the inquiry could modify the reform timeline or scope, meaning lenders who moved early may have acted on assumptions that turn out to be wrong.

What This Means for Investment Property Borrowers

The practical impact is significant:

Higher assessed debt: Without negative gearing add-backs, the assessed debt on an investment property increases because lenders no longer credit the tax benefit as income. This reduces borrowing capacity by an estimated 5–15% for some investor profiles.

Policy inconsistency across lenders: Brokers report being unable to predict which lender will approve a given investor loan application, as policies are changing week to week. The Adviser reports brokers are split on how fast banks should move — some argue early adjustment is prudent, others say it creates unnecessary complexity before legislation is finalised.

Double impact for self-employed investors: Self-employed borrowers applying for investor loans face a compound challenge — tighter income verification requirements under Alt Doc policies plus reduced rental income recognition under updated serviceability models.

The Non-Bank Lender Advantage in This Environment

Non-bank lenders operate under different regulatory frameworks and are not subject to the same APRA prudential guidelines that drive major bank policy changes. This means:

• More consistent policy: Non-bank lenders like MPFG Capital have not made premature changes ahead of legislation that has not yet passed
• Stable serviceability models: Investor loan applications are assessed on current verified income rather than anticipated future tax treatment
• Faster decisioning: Without internal committee reviews triggered by regulatory change, non-bank lenders can provide clearer and faster approval decisions

For self-employed property investors, MPFG's Alt Doc investor loan products assess income through BAS statements or accountant letters, providing a stable pathway that does not rely on major bank policy stability.

MPFG's View

The current environment highlights a structural weakness in relying exclusively on major bank financing for investment property: policy changes driven by anticipated legislation can disrupt approvals months before any law is passed. Borrowers who work with non-bank lenders with consistent credit policies avoid this volatility.

If you are an investor — particularly a self-employed investor — who has been told your borrowing capacity has reduced or your application has been declined, contact MPFG Capital to discuss your options under stable, non-bank lending criteria.

Information sourced from The Adviser (May 2026) and CoreLogic research. This article is for general information purposes only and does not constitute financial advice. Past approval does not guarantee future approval.