APRA to remove interest-only home loan speed limits

Posted: 19 December 2018 11:41 am
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danger sign1Interest-only lending could be set for a return as the banking regulator says benchmarks have served their purpose.

The Australian Prudential Regulation Authority (APRA) has announced it will remove limits it put in place on interest-only lending.

In March 2017, the regulator capped interest-only lending at 30% of new home loan business for Australian banks. APRA flagged its intention to remove the cap, subject to banks demonstrating the strength of their lending standards.

"Most [banks] have now provided these assurances," APRA said in a statement.

From 1 January 2019, the cap on interest-only lending will be removed for banks that are no longer subject to APRA's benchmarks for investor lending. For other banks, the cap will be removed concurrently with the investor loan cap.

"APRA's lending benchmarks on investor and interest-only lending were always intended to be temporary. Both have now served their purpose of moderating higher risk lending and supporting a gradual strengthening of lending standards across the industry over a number of years," APRA chairman Wayne Byres said.

However, easing interest-only restrictions may offer little help to borrowers, as banks crack down on credit standards. According to the Australian Financial Review, several banks have flagged tighter lending conditions, with Suncorp requiring mortgage applicants to provide a minimum of three months of statements for all credit liabilities.

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