Homeloans expands IO offering

As regulatory crackdowns see other lenders cool off on interest-only lending, a non-bank lender has announced that it will increase its offering.

Effective 1 September, non-bank lender Homeloans will offer home loans with IO repayment structures for its FlexiChoice range, with rates starting at 4.24 per cent per annum (p.a.) and reaching 8.02 per cent p.a.

Currently, IO rates are available for other Homeloans suites including the Ultra Plus and Optima ranges.

The lender will offer IO options for owner-occupier and investment FlexiChoice loans with loan-to-value ratios (LVR) of up to 80 per cent. Rates begin at 4.24 per cent p.a. for owner-occupiers and hit 4.74 per cent p.a. for investors.

Borrowers requiring alt doc loans will be offered IO loans with rates starting at 5.39 p.a. and reaching 5.49 per cent p.a. provided that the LVR does not exceed 80 per cent.

Those seeking a FlexiChoice Specialist Alt Doc owner-occupied "assist" loan will see rates of up to 8.02 per cent p.a.

The changes follow a mandatory clampdown on banks’ IO lending by the Australian Prudential Regulation Authority (APRA) in May. Since then, many lenders have hiked rates on IO loans or dropped rates for principal and interest (P&I) loans, with CBA, Teachers Mutual Bank and Heritage Bank among the most recent movers.

As it stands, non-bank lenders are not subject to the crackdown. However, that could change if new powers proposed for APRA in the 2017 budget are passed in the senate.  

Speaking to Mortgage Business earlier this week, Homeloans joint CEO Scott McWilliam said that despite only being a “small part” of the lending sector, there is “strong momentum” for non-bank lenders as customers and brokers see value in alternatives.

“We're still a very small part of the market when you compare what we're writing compared to some of the big banks, the majors and also the regionals. So, our ability to grow is obviously a lot easier than it is when you're a big bank.

“There’s a lot of movement and noise in the market, whether it be turnaround times, pricing and ... interest rate movements over the last 12 months. With that type of noise, customers and brokers want to know what else is available.”

St George cuts IO rates

St George Bank and its subsidiaries today (30 August) announced reductions on certain fixed rate loans with IO and P&I repayment structures.

Effective immediately, rates on one- to five-year fixed rate IO owner-occupier, residential investment and portfolio loans will be cut by between 10 and 40 basis points.

The new standard fixed IO owner-occupier rates start at 4.39 per cent p.a. for two-year terms and reach 4.99 per cent p.a. for five-year terms. Loans with the Advantage Package rate will start at 4.24 per cent for two-year terms and hit 4.84 per cent p.a. for five-year terms.

Residential investment and portfolio fixed IO rates will now start at 4.64 per cent p.a. for two and three-year terms and reach 5.24 per cent p.a. for four and five-year terms. The new Advantage Package rate for investment and portfolio loans begin at 4.69 per cent p.a. for one-year terms and peak at 5.09 per cent p.a. for four and five-year terms.

[Related: Non-banks ‘shouldn't be wary’ of APRA's new powers]

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Lucy Dean

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