ASIC to shine spotlight on interest-only lending
Australia’s credit regulator has put lenders on notice over interest-only home loans.
Interest-only products have been under heavy scrutiny, with the Australian Prudential Regulation Authority (APRA) putting a 30% cap on new interest-only lending. Now the Australian Securities and Investments Commission (ASIC) has flagged a targeted review of interest-only lending.
ASIC said the first stage of its review of large, mid-tier and small banks as well as non-bank lenders found that major banks have cut back their interest-only lending by $4.5 billion over the past year. But ASIC said other lenders have partially offset the decline by ramping up their interest-only lending.
The regulator now says it will review individual loan files from lenders and mortgage brokers to ensure the loans were provided in appropriate circumstances.
“ASIC will carefully review cases where owner-occupiers have been provided with more expensive interest-only home loans, to ensure that consumers are not paying for more expensive products that are unsuitable,” the regulator said in a release.
ASIC deputy chair Peter Kell said there were “no excuses” for lenders and brokers failing to meet their legal obligations when recommending interest-only loans.
"While interest-only loans may be a reasonable option for some borrowers, lenders must make appropriate enquiries into the needs and financial circumstances of their customers, and they must be able to demonstrate that they have done so,” Kell said.
- The key to investing in property during lockdown
- Home stretch: 1 in 3 Aussies would move if they could work from anywhere
- How much less can you borrow under new APRA home loan rules?
- RBA Survey: Half of experts say Big Four will raise rates out of cycle, cash rate holds
- RBA survey: 56% of experts predict a cashless Australia by 2031