Interest-only home loan demand plummeting
Regulatory moves to constrict interest-only loans seem to be working.
New figures from Mortgage Choice show demand for interest-only loans through the brokerage fell by more than 20% from February 2017 to February 2018. While interest-only loans account for 35.95% of loans written through the broker in February 2017, this proportion had fallen to 12.22% by February 2018.
"Compared to this time last year, we have seen a dramatic decline in the proportion of interest-only loans, and it does not come as a surprise," Mortgage Choice chief executive John Flavell said.
Flavell said moves in March 2017 by the Australian Prudential Regulation Authority to limit new interest-only lending to 30% of bank portfolios has had an effect on the market.
"As a result, many lenders significantly increased their interest-only home loan rates and enforced stricter rules in order to curb demand for this type of product," he said.
However, with interest-only lending now running at only 20% of all new lending, Flavell said some restrictions could begin to ease.
"This may provide lenders with some leeway to loosen the reins on their interest-only home loans," he said.
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