Hilton Parkes Real Estate -
Norwest Office: Level 5, Nexus Building, 4 Columbia Court Norwest NSW 2153
02 9629 7888
Plumpton Office - Shop 43, Plumpton Marketplace Plumpton NSW 2761
02 9832 3211
  • Home
  • Selling Information
    • Request Sales Appraisal
    • Should I Sell Or Rent?
    • Helpful Selling Hints
    • Free Suburb Report
    • Blog
    • 101 Tips For Presenting Your Home To The Market
    • Maintaining And Preparing Your Home For Profit
    • Sell Your Home Without Placing It On the Market
  • Investment Information
    • Investment Landlord Book of FAQs
    • Six Capital Gains & Depreciation Facts For Property Investors
    • Increase Cash Flow For Your Investment Property
  • Property Management
    • Property Investing Steps
    • When should you choose a property manager to manage your investment property
    • Why Choose Hilton Parkes Real Estate 
    • Benefits Of Using Hilton Parkes Real Estate Property Management
  • Renting
    • Free Rental Appraisal
    • Property Management Services
    • Applying For a Property
    • Investor News
    • Tenant Information
    • Search Rental
    • Maintenance Request
    • 9 Biggest Landlord Disasters
    • Tax Depreciation
    • Tenant Repair Tips!
    • Landlord Portal
    • Tenant Portal
    • Rental Payment
  • Buying
    • Real Estate Agents
    • Search Properties
    • Latest Listing
    • VIP Buyer Alerts
    • Sales Results
    • Suburb Profiles
    • Property Market Data
  • Company Profile
    • Contact Details & Enquiry Form
    • About Us
    • Office Locations
    • Meet Your Team
    • Privacy Policy
  • Careers
    • Career In Real Estate – Application Form
    • A Career In Real Estate
  • Client Reviews
    • Testimonials
    • Client Video Reviews
    • Referrals
  • Make An Offer

Australia’s interest-only lending benchmark scrapped, signals APRA’s ‘changing intent’

Australia’s banking regulator has announced it will remove a major restriction that has halved interest-only loans since it was implemented. In March 2017, the Australian Prudential Regulation Authority forced lenders to limit new interest-only lending to 30 per cent of residential home loans being issued. The interest-only lending restriction was a follow up to a cap on investor lending — which put a 10 per cent limit on bank lending to property investors — with the two measures aimed at significantly improving bank lending standards and reducing higher-risk lending.

 

The measures had a noticeable impact amid banks lifting investor interest rates and requiring bigger deposits — investor presence in the nation’s biggest property markets took a sizeable step backward.

The effect on interest-only loans was immediate: new interest-only loans nosedived well below the cap of 30 per cent to only 16 per cent of new loans issued.

The 10 per cent limit on bank lending to property investors was scrapped in April this year and on Wednesday, APRA chairman Wayne Byres announced the limit on new interest-only lending would also be removed, saying it had “served its purpose”.

“The benchmark on interest-only lending was put in place as a temporary measure in 2017, with the aim of reducing the level of interest-only lending and improving the quality of mortgage portfolios,” he said.

“Since the introduction of the benchmark, the proportion of new interest-only lending has halved, and interest-only lending at high loan-to-valuation ratios has also declined markedly.

“In summary, as with the benchmark on investor loan growth, this measure has served its purpose.”

ANZ head of Australian economics David Plank said the decision was a strong signal from the banking regulator that Australia’s credit tightening had gone far enough.

South Brisbane
The immediate impact on the property market will be minimal but the removal of the 30% cap signals a change in intent from APRA, says David Plank. Photo: Tammy Law

 

“I think the immediate impact of this announcement will be minimal in terms of how it will affect investors and the housing market but there’s a signal here in terms of the regulator’s intent,” he said.

“It signals a changing intent on the direction of credit tightening. What it says is they (APRA) don’t want to see it go further … it’s about ensuring there’s not unnecessary tightening of credit.”

Mr Plank said while the timing was possibly connected to the slowdown in Sydney and Melbourne’s property markets, it was more about the slowdown in lending to investors.

“This was always intended to be temporary. It’s not directly related to the weakness in house prices because if we reached a situation where house prices were going up but interest-only loans were down, they still would’ve removed the restriction,” he said.

Domain economist Trent Wiltshire said the figures were a clear sign APRA’s intervention had been successful.

AH_11641_rygyqo
Investor demand has waned over 2018 amid higher interest rates, says Trent Wiltshire.

 

“At their peak, 46 per cent of loans were interest-only. Now they’re down to 16 per cent. It’s clearly worked in terms of bringing down that type of lending,” he said. But Mr Wiltshire said scrapping the restriction to interest-only loans was unlikely to have an immediate impact on investor demand, mainly because of the cost of money.

“The banks have had the space to increase their interest-only loans if they want to … but they haven’t,” he said. “This is not just about banks being unwilling to lend — investor appetite for new loans has declined significantly over 2018.

“The investors don’t want to borrow. They see worse prospects for capital gains, sentiment has turned, and the ALP’s negative gearing policy could be weighing on appetite as well.”

Generic photo. apartments, bondi, interest rates, real estate, sydney, rental market, housing market, selling apartments.
Scrapping the limit to interest-only loans is a positive for consumer sentiment, says Simon Pressley.

 

He said lower interest rates was more likely the key factor in bringing investors back to the market, rather than removing restrictions. “What would bring them back? Lower interest rates would help. A change in sentiment. The cash rate is the big one though,” he said.

Market analyst and Propertyology managing director Simon Pressley welcomed the change but said it would mean little to most Australians, who were finding it hard to get a mortgage for family homes.

“Today’s announcement is good from a sentiment point of view, it’s good for Australians to hear about the second relaxation of APRA’s policy tightening in only a few months,” he said.

“But at the end of the day, what the Australian public needs is credit approved for worthy borrowers, the type of credit most people need for family homes. “The cap on interest-only loans was one of many measures that were an extreme reaction from APRA to a housing boom in Australia’s biggest city that had the highest debts.

“The problem was, these measures were implemented Australia-wide. The world revolves around credit. The minute you make it really hard, you stop some of the most important decisions people make. There’s already been damage done but it’s not too late to intercept things.

“That’s what it boils down to — but I think the fact we’re seeing signs that perhaps things have gone too far, that APRA overreacted, is encouraging.”

Source Article: Australia’s interest-only lending benchmark scrapped, signals APRA’s ‘changing intent’

By: Ellen Luton

Published 19th Dec 2018

Posted in Uncategorized | No Comments »

Appraisal Request - Sales

Privacy Policy | Terms & Conditions

Copyright © Hilton Parkes Real Estate 2021 Site by Agentpoint

Call Now ButtonCall Us Today