APRA to remove banks’ interest-only lending restrictions

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APRA to remove banks’ interest-only lending restrictions

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Updated

December 19, 2018 10:14:16

The financial regulator will lift restrictions on interest-only residential lending, in an attempt to stabilise Australia’s ailing housing market.

The Australian Prudential Regulation Authority (APRA) imposed the restrictions in March 2017 to force lenders to limit new interest-only lending to 30 per cent of home loans that they issue.

It is the second lending restriction APRA has relaxed this year. In April, the regulator removed a “speed limit” it had imposed on lenders that required them to keep investor credit growth below 10 per cent per year.

Australia’s median property price experienced its sharpest drop since the global financial crisis earlier this month, with capital city values falling 0.9 per cent.

Sydney and Melbourne, the capitals which enjoyed the biggest property booms, were hit hardest — falling by 9.5 and 5.8 per cent from peak to trough.

“APRA’s lending benchmarks on investor and interest-only lending were always intended to be temporary,” APRA chairman Wayne Byres said.

“Both have now served their purpose of moderating higher risk lending and supporting a gradual strengthening of lending standards across the industry over a number of years.”

The regulator touted its success in reinforcing “sound lending practices”.

“The introduction of the benchmark has led to a marked reduction in the proportion of new interest-only lending, which is now significantly below the 30 per cent threshold,” APRA wrote in a statement.

More to come.

Topics:

business-economics-and-finance,

banking,

housing-industry,

regulation,

economic-trends,

australia

First posted

December 19, 2018 09:42:10


Contact David Chau

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