The latest figures from the Australian Prudential Regulation Authority (APRA) shows a marked drop in interest-only terms for new housing loans.
APRA’s June Quarterly Authorised Deposit-taking Property Exposures
report indicates a 7% drop in interest-only terms for new lending from the previous quarter, in spite of a 10.6% rise in new lending in all categories since March.
The financial regulator’s latest data indicates that banks have responded to its demand to limit interest-only terms to 30% of all new lending, according to Sally Tindall, money editor at comparison website RateCity.
“Today’s data is clear: the banks have heard APRA’s message and have hit the brakes for new lenders looking to pay interest-only,” Tindall said. “Interest-only terms are now sitting at 30.5 per cent of all new lending which is just a fraction above APRA’s target. [However] the [Big Four] banks still have some work to do: collectively they’re sitting at 31.5 per cent.”
Existing customers appear to be hanging on to their interest-only terms, despite the increase in rates. APRA’s June report shows a moderate 0.4% drop in interest-only lending across the ADI loan books since the March quarter.
“RateCity data shows that investors on interest-only terms are on average paying 65 basis points more than owner-occupiers paying principal-and-interest,” Tindall said. “The APRA data also shows the banks are tightening the screws on borrowers with small deposits, with today’s results showing a slight dip for people with less than 10 per cent deposit.”
Should investors make the switch to P&I?
With the major lenders limiting new interest-only lending to investors and hiking interest rates on interest-only loans, should investors seek principal-and-interest loans, or is there another strategy they could pursue?
“The latest APRA figures suggest new investors are opting to pay principal-and-interest instead of higher rates,” Tindall said. “That said, not all investors are making the switch – people looking to maximise negative gearing are likely to stick it out with higher rates.”
“Either way, the best strategy for both sets of investors is to shop around for a lower cost loan. While investor rates under 4 per cent are a dying breed, there are still a handful to choose from, starting from as low as 3.74 per cent for someone paying principal and interest and 3.94% for investors paying interest-only.”
“That’s more than 200 basis points lower than the big banks’ standard variable investor rates, which translates to over $150,000 in savings over the life of the average loan.”
Value Of Loans To Property Investors Continues To Slide
Whether you are looking to buy your first home, move home, refinance, or invest in property, a mortgage broker can help. Access loans from all the major lenders, get help with paperwork – plus there is no charge for this service. Get help from a local mortgage broker
Top Suburbs :
st kilda west
Get help with your investment property
Do you need help finding the right loan for your investment?
When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.
Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus and appointment is free.
We value your privacy and treat all your information seriously - you can check out