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IN PHOTO: A real estate agent's sign outside a house shows that it has recently been sold in Sydney October 13, 2014. Frothiness in Australia's property market has triggered central bank warnings of regulatory steps to rein in loans to investors, but the nation's banks are turning a deaf ear, sceptical that any such action is needed or imminent. Lending to investors has jumped this year to its highestsince comparable records started in 1991, accounting for about half of Australia's residential loans in value terms. Investor interest has also helped pushed housing prices in Sydney and Melbourne to the point where most first-time home buyers are widely seen as priced out of the market. Picture taken October 13, 2014. REUTERS/David Gray

The banks might make up to $400 million a year by raising interest rates on home loans, but it would come as a hard blow to first time home buyers. The ANZ Bank Group last week announced that it is planning to limit lending to landlords by raising the index rate by 0.27 percent to 5.56 percent on the investor's loan.

The move by ANZ would add another $40 to a monthly payment of $300,000 on mortgages. The Commonwealth Bank of Australia (CBA) followed suit the very next day and the National Australia Bank (NAB) on Monday also raised its interest-only home loans by 0.29 percent.

Andrew Wilson, senior economist of the Domain Group, said that tenants are soon going to feel over burdened with the hefty monthly payments, particularly in Sydney which faces a chronic shortage of properties, and Melbourne where only 2 percent of the houses are vacant and the average rent for properties are already high.

Domain reported that Mr. Wilson, however, expects Perth to be the least affected city as it has the highest vacancy rate at 3 percent. "Certainly for landlords that are in areas which are popular, it gives them the opportunity to push rents up," Dr. Wilson said. "If they can't, they'll absorb it, but if they can, it will become part of the factor that drives up rents in areas where there are higher demand for rental properties."

The reasons behind the higher rate of interest for property lending are many. According to the Australian Financial Review, low interest rates in Sydney and Melbourne have so far been responsible for the high house prices, which property investors have been trying to make the most of. Matt Comyn, the group executive for retail bank services of CBS, said on Friday that at the industry level, approval of loans for investors has gone up by 22 percent compared to the last year.

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