Powered by MOMENTUM MEDIA
Powered by MOMENTUM MEDIA
subscribe to our newsletter
APRA scraps interest-only cap

APRA scraps interest-only cap

The prudential regulator has announced that it will be removing its 30 per cent speed limit on interest-only lending from 1 January 2019. 

The Australian Prudential Regulation Authority (APRA) has announced that it will remove its supervisory benchmark on interest-only residential mortgage lending by authorised deposit-taking institutions (ADIs).

The benchmark was put in place as a temporary measure in March 2017, as part of a range of actions over recent years to “reinforce sound lending practices”.

Advertisement
Advertisement

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

Earlier this year, APRA also announced its intention to remove the supervisory benchmark on investor loan growth, subject to ADIs providing certain assurances as to the strength of their lending standards.

According to APRA, most ADIs have now provided those assurances, adding that ADIs that are no longer subject to the investor loan growth benchmark will also no longer be subject to the benchmark on interest-only lending from 1 January 2019.

The regulator said that for other ADIs, the benchmark will be removed concurrently with the removal of the investor loan growth benchmark.

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

“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.”

APRA also stated that notwithstanding the removal of the interest-only benchmark, ADIs “still need to ensure they maintain adequate oversight of the level and type of interest-only lending”, consistent with APRA’s Prudential Practice Guide APG223 Residential Mortgage Lending and ASIC’s responsible lending obligations on borrower requirements and objectives. 

 [Related: APRA announces fresh mortgage guidance]

APRA scraps interest-only cap
mortgagebusiness

Charbel Kadib

Charbel Kadib is a journalist on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel held roles with public relations agency Fifty Acres, and the Department of Communications and the Arts.

Charbel graduated from the University of Notre Dame Australia with a Bachelor of Arts (Politics & Journalism).

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Latest News

The prudential regulator has launched a consultation on a proposal that would expand its collection remit for home lending data.   ...

The balance sheets of the big four banks are increasingly exposed to residential mortgages, as other forms of revenue generation become less...

Equipment finance lender Axsesstoday has completed a $260-million sale of most of its business and subsidiaries to an affiliate of Cerberus...

FROM THE WEB
podcast

LATEST PODCAST: New lending launches

Do you think the mortgage market will see more consolidation this year?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.