Investors’ favourite loans have crashed to a historic low
INTEREST-only loans have crashed to a historic low, a precursor that could spark the next big investor boom in the property market.
The interest-only loans floodgates could soon be reopened. Picture: Janine Eastgate.Source:News Corp Australia
INTEREST-only loans have crashed to a historic low, a precursor that could spark the next big investor boom in the property market.
The dramatic decline came off an Australian Prudential Regulation Authority edict for lenders to slash the loan category to below 30 per cent of all new loans they write.
Lenders have gone even further than APRA required, halving the category within a year to make up just 15.22 per cent of new lending in the December quarter (compared to 36.26 per cent in the three months to March).
That responsiveness means APRA — which holds power over banks, credit unions, building societies, insurance and superannuation industries — is well satisfied and it’s already issued soothing words promising an end to interest-only hostilities soon.
Coupled with generous negative gearing provisions, the loans helped fuel housing investment borrowing to levels not previously seen in the Australian market.
Generous tax conditions and record low rates sparked a rise in buyer numbers across the country.Source:Supplied
RateCity.com.au money editor Sally Tindall said the fall was “complete vindication for APRA” though the banks were “making hay out of the APRA intervention” charging 39 basis points more for owner occupiers paying interest-only and 30 basis points more for investors paying interest-only.
“Now the banks have proven to APRA they can remain well under the cap, they’re looking to loosen the screws. Over the last month we’ve seen the big four and a range of challenger banks drop rates for fixed rate interest-only lending, some to pre-March 2017 levels,” she said.
“This is only the beginning. The banks have overshot the mark by half so we expect they’ll continue dropping interest-only rates to rebalance their books.”
AVERAGE RATES:
Owner-occupiers, principal & interest 4.31 per cent
Owner-occupiers, interest-only 4.7 per cent
Investors, principal & interest 4.76 per cent
Investors, interest-only 5.06 per cent
(Source: RateCity.com.au, March 2018)
