19 December 2018
Today’s announcement of the removal of the 30% benchmark for new interest-only residential mortgages will allow all banks to offer more choice for customers, leading to an increase in competition across the industry, particularly for smaller and regional banks.
The benchmark was introduced by APRA in 2017 to respond to concerns of an oversupply of interest-only loans. The benchmark had a greater effect on banks with smaller home loan lending operations.
CEO of the Australian Banking Association Anna Bligh said that the decision by APRA would not only benefit customers, it also showed that banks were lending prudently with the proportion of interest-only loans more than halving in two years.
“APRA’s announcement today shows that banks have adjusted lending to respond to concerns around an oversupply of interest-only loans, illustrating a prudential system where both banks and regulators can quickly and effectively respond to a changing environment,” Ms Bligh said.
“While banks will continue to lend prudently, today’s decision will mean all banks can offer more choice for customers who are looking to buy a house or apartment.
“Increased competition across the industry will mean customers have more ability to shop around for the best deal for them when looking at an interest-only home loan,” she said.
In terms of banks home loan commitments, the proportion of interest-only loans are now 16.2% much lower than the proportion seen two years ago (37%).
ENDS
Contact: Rory Grant 0475 741 007
Latest news
The ABA welcomes the passage through the House of critical legislation to ensure Australia’s payments regulatory framework is brought up-to-date and urges the Senate to quickly pass this overdue legislation too. The proposed legislation will bring digital wallets, cash distribution services, buy now, pay later schemes and other emerging payment methods within regulatory oversight, significantly… Read more »
With the AFL and NRL finals about to kick off and demand for tickets set to surge, the Australian Banking Association is warning footy fans to be on the lookout for scammers. The ABA is issuing this warning during Scams Awareness Week and as tickets for the AFL finals go on sale from today. … Read more »
The Australian Banking Association (ABA) has welcomed today’s announcement from the Federal Government to bring forward the start of the Home Guarantee Scheme. Under the Guarantee, eligible first home buyers are able to purchase a home with a smaller deposit and avoid paying lenders’ mortgage insurance. ABA CEO Simon Birmingham said it made sense to… Read more »