Mortgage investors to profit from APRA curbs

APRA’s macroprudential measures, which started in 2014 with a 10 per cent cap on investor lending growth and more recently included limits on interest-only lending, have driven borrowing rates higher.

Rate hikes are expected to feed directly into higher investment returns on commercial mortgage lending vehicles, such as the Merricks Capital Partners Fund, which is earning in excess of 10 per cent annualised before fees.

Merricks Capital chief investment officer Adrian Redlich describes the knock-on effect as a positive for mortgage investors, particularly those in the high-quality segment of the loan market.

“With the major banks now stepping away from investment lending, a void has been created and the lack of viable financing alternatives has seen a number of very attractive investment opportunities emerge,” Mr Redlich said.

The key to insuring investors can actually capitalise on the current lending landscape comes down to loan quality, says Merricks’ COO Adam Lindell. Relatively low LVRs, a strong network of “independent originators” are also essential, he says.

[Related: Aggregator warns brokers of major industry changes]