ANZ records strong mortgage growth

In a trading update, ANZ revealed that it had grown owner-occupied lending by 10 per cent over the quarter, or 1.4 times system, while investor growth was subdued at 2 per cent on an annualised basis.

Last year, the big four banks encouraged interest-only (IO) customer to switch to principal and interest (P&I) mortgages by hiking IO rates, reducing P&I pricing and waving fees.

ANZ saw $5.7 billion of IO loans switched to P&I in the first quarter of 2018, down from $9.5 billion in the fourth quarter of last year.

APRA introduced its interest-only benchmark in March last year, which saw banks cap interest-only mortgages at 30 per cent of new flows.

In a recent speech, APRA chairman Wayne Byres said that while its curbs on investor and interest-only mortgages are a short-term solution, the battle for a more balanced mortgage market is not over yet.

The chairman said: “Our benchmark of no more than 30 per cent of new lending being on interest-only terms is not overly restrictive for borrowers who genuinely need this form of finance — roughly one in three loans granted can still be on an interest-only basis — but it has required the major interest-only lenders to establish strategies that incentivise more borrowers to repay their principal.

“The industry has been quite successful in doing so. Recent data for the last quarter of 2017 shows that only about one in five loans were interest-only, and the number of interest-only loans with high LVRs continued to fall to quite low levels. All of that is positive for the quality of loan portfolios.”

However, Mr Byres added that the regulator is “not declaring victory just yet” and wants to see higher lending standards become a more deep-rooted foundation of the home lending landscape.

“We still want to see that the improvements the industry has made are truly embedded into industry practice,” the chairman said. “And we can modify our interventions as more permanent measures come into play.”