Known as “higher-risk”, APRA (Australian Prudential Regulation Authority) has announced that it will remove its tough requirements on interest-only loans from January 1, 2019.
Popular with property investors, Chairman Wayne Byres said the tight restrictions on interest-only mortgages had been a success with the number of new interest-only loans halved since the policy was introduced in March 2017.
Research director at RateCity (a financial comparison website), Sally Tindall said investors would welcome the move.
“APRA’s intervention has had a marked effect on new borrowing,” she said.
“This announcement today will see banks re-open their books to more interest-only lenders, particularly investors.”
Investors are attracted to interest-only loan mortgages as they allow them to buy properties that can be sold a few years later, allowing them to keep any capital gains without having to pay down the loan principal.
However, these investors commonly revert to principal-and-interest after five-year terms, which entails higher payments for borrowers.
Industry bodies, The Property Council of Australia (PCA) and Housing Industry Association (HIA) said APRA’s move would help stabilise the real estate market as the availability of finance is vital to the sustainability and growth of the property sector.
APRA said it expected lenders to maintain appropriate risk limits after its regulations were lifted.
Original article: The New Daily, December 19, 2018
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Image credit: www.theguardian.com.au