ANZ increases term for interest-only loans

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Australia and New Zealand Banking Group (ANZ) has announced that it will offer interest-only loans for up to 10 years to property investors, to boost business amid weakening economic conditions, according to Reuters.

This decision will be effective starting April 25, and the bank will extend the period of interest-only loans – which do not require principal repayments – to property investors by five years to a decade. In addition, the size of the loans is going to be increased to up to 90% of the property’s value.

“On recent review, we have made a decision to increase our focus on the investor market. The upcoming changes demonstrate our continued appetite in the investor market, whilst ensuring we remain in line with our APRA requirements,” ANZ said in a statement.

The Australian Prudential Regulation Authority (APRA) refused to comment on ANZ’s recent move.

In 2018, APRA lifted strict caps on investor and interest-only lending, which were implemented to avoid a property bubble. The shift resulted in an 8% drop home values across the country since September 2017.

The regulator also warned that the re-emergence of the rapid growth in interest-only lending “at an industry-wide level” would raise systemic concerns. Hence, APRA said it would keep an eye on changes in lending standards by the banks.  

“In such a scenario, APRA would consider the need to apply industry-wide measures in response,” APRA said.

Credit growth in Australia decreased to a record low of 4.2% in the 12 months to December, as lending tightening by banks and a sharp fall in housing prices dampened demand.

Home lending to investors by ANZ, likewise, slid by 3.8% to $3.2 billion over the period, while overall growth in the system was 1%.

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