Australian Prudential Regulation Authority (APRA) has recently announced that interest only loans are to be restricted to 30% of all new residential mortgage loans. Currently, interest only lending represents approximately 40% of residential lending.

The Banks have been updating their policies this week to follow the new guidelines. If you want to apply  for  a  residential  interest  only loan these changes are likely to affect you.

Some dot points to cover some of the changes are:

1. Interest only residential mortgage lending will be limited to a maximum of 30% overall of the market.
2. A maximum of 80% LVR will be offered to owner occupier interest only loans (reduced from 95%).
3. A maximum of 80% LVR will be offered to investment interest only loans (reduced from 90%).
4. There will be more emphasis and encouragement on applications for principal and interest loans.
5. Interest only loans will only be considered if they are specifically suitable to that individual customer’s needs.
6. Less discounts will be offered for new interest only loans.
7. Rebates are unlikely to be offered for new interest only home loans.
8. Those seeking a loan for building and construction will no longer be eligible to apply for an interest only loan.
9. For investment lending, the maximum interest only period will be reduced to 5 years bringing investment lending in line with owner occupier interest only lending.

Please  Note:  The  policy  changes  above  do  not  apply  to  all  banking  institutions  across  the  board.  Each lender will implement their own unique policies and as such it is important to understand the policies to be implemented by your chosen lender.

If you have any concerns with these changes, or want to try a lender on our panel which hasn’t passed on these changes yet, please give us a ring on 1300 487 669.