Banks are starting to change lending policies in the hope of encouraging investors to return to the market.

More investors sold than bought during the recent national property boom and the value of borrowing by investors has dropped further in 2022.

Now the NAB is seeking to encourage investors by increasing the proportion of rental income used to calculate a borrower’s capacity to service a loan.

Lenders generally accept only 80% of rental income along with other income to calculate an investor’s borrowing capacity. NAB is lifting it to 90%.

ANZ is offering investors who refinance their loans a $4,000 cashback incentive. It has also cut its basic home loan rate for new customers.

CoreLogic’s Tim Lawless says investor borrowing since May fell 26% in NSW, 23% in Queensland and 20% in Victoria.

“The drop in investment activity is bad news for rental markets, with less investment activity implying a slowdown in rental supply at a time when more rental supply is desperately needed,” he says.