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APRA figures point to surge in interest-only loans

As ASIC prepares a further investigation into interest-only loans, new APRA figures reveal an increase in the number of new interest-only loans written over the year to September.

Released yesterday, APRA’s Quarterly Authorised Deposit-taking Institution (ADI) Property Exposures for the September 2015 quarter found that banks with more than $1 billion of residential term loans approved $366 billion of new loans in the year ending 30 September 2015.

This is an increase of $36.5 billion (11.1 per cent) on the previous year.

Of these new loan approvals, $159.6 billion (43.6 per cent) were interest-only loans – an increase of $23.9 billion (17.6 per cent) from the year ending 30 September 2014.

The new figures follow the announcement of a fresh investigation into interest-only lending by ASIC senior executive leader Michael Saadat earlier this month.

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Speaking at the FBAA conference at the Gold Coast on 13 November, Mr Saadat said the review would focus on interest-only lending through the third-party channel.

“Going forward, we intend to undertake a further review in the interest-only area moving on from lenders to brokers with a particular focus on brokers’ consideration of consumer requirements and objectives,” he said.

In August, ASIC published the findings of an interest-only lending probe, in which the regulator surveyed 11 lenders.

ASIC found that a greater proportion of interest-only home loans (by number) were sold through third-party channels than via direct channels.

“This indicates that brokers may be one driver of the increase of interest-only home loans,” the report said.

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ASIC found that for the surveyed lenders in the December 2014 quarter, 57 per cent of the total number of interest-only home loans were sold through third-party channels (up from 49 per cent in the March 2012 quarter).

Meanwhile, approximately one third of all principal-and-interest home loans were sold through third-party channels, with a majority of loans (64 per cent) sold through direct channels in the December 2014 quarter.

While a high proportion of interest-only home loans originate through broker channels, responses from the surveyed lenders showed that incentives or commissions paid to third-party mortgage brokers, or internally to employees, were consistent for both interest-only and principal-and-interest home loans.

[Related: Owner-occupiers increasingly using interest-only loans]

APRA figures point to surge in interest-only loans
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