Proportion of IO loans falls to under 17%, with borrowers unlikely to see any discounts in 2018, according to expert
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Proportion of IO loans falls to under 17%, with borrowers unlikely to see any discounts in 2018, according to expert
The proportion of interest-only loans written by banks has fallen to just 16.9%, APRA’s latest property exposures data for the September quarter show.
That compares with 31.47% in the June Quarter and is far below APRA target for IO lending to comprise less than 30% of new loans.
Sally Tindall, money editor of comparison site RateCity.com.au’s, described the result as a “slam dunk for APRA” and “a colossal turnaround in the way banks view interest-only terms.”
RateCity.com.au’s data shows a rate differential between IO and principal & interest loans of 30 basis points for investors and 35 basis points for owner-occupiers.
No light at the end of the tunnel
Yesterday saw Westpac and its subsidiaries cut rates on a number of interest-only fixed rate loans, by up to 30 basis points.
However, interest-only borrowers are unlikely to see any discounts next year, CANSTAR group executive Steve Mickenbecker told MPA. “My suspicion is APRA and the banks will have seen that interest only for non-investors…is almost dead.”
Concerned by rising debt, APRA is unlikely to tolerate IO lending to owner-occupiers, says Mickenbecker “that’s the philosophy they’d like to see and I don’t think the banks are going to change that.”
As for discounts for IO investors, “I haven’t seen a lot of evidence of that with anyone at the moment, I don’t think anyone’s game to stick their head above the parapets and be seen by APRA to take that stance.”
Silver lining for P&I and non-major customers
The decline of interest-only lending has also been good for principal & interest borrowers.
For a start, it’s not just due to IO rate hikes, Mickenbecker told MPA. “Most of it happened earlier this year, but what’s happened in the meantime is that there’s been a heck of repricing down for owner-occupied, so it’s widened that differential.”
84 of the lenders on CANSTAR’s approximately 100-strong panel have P&I rates of below 4%.
Those IO borrowers still in the market should look at non-major and non-bank lenders. The price differential for IO vs P&I borrowers is far higher at the majors (on average 73 basis points for investors) than other lenders (24 basis points).
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The proportion of interest-only loans written by banks has fallen to just 16.9%, APRA’s latest property exposures data for the September quarter show.
That compares with 31.47% in the June Quarter and is far below APRA target for IO lending to comprise less than 30% of new loans.
Sally Tindall, money editor of comparison site RateCity.com.au’s, described the result as a “slam dunk for APRA” and “a colossal turnaround in the way banks view interest-only terms.”
RateCity.com.au’s data shows a rate differential between IO and principal & interest loans of 30 basis points for investors and 35 basis points for owner-occupiers.
No light at the end of the tunnel
Yesterday saw Westpac and its subsidiaries cut rates on a number of interest-only fixed rate loans, by up to 30 basis points.
However, interest-only borrowers are unlikely to see any discounts next year, CANSTAR group executive Steve Mickenbecker told MPA. “My suspicion is APRA and the banks will have seen that interest only for non-investors…is almost dead.”
Concerned by rising debt, APRA is unlikely to tolerate IO lending to owner-occupiers, says Mickenbecker “that’s the philosophy they’d like to see and I don’t think the banks are going to change that.”
As for discounts for IO investors, “I haven’t seen a lot of evidence of that with anyone at the moment, I don’t think anyone’s game to stick their head above the parapets and be seen by APRA to take that stance.”
Silver lining for P&I and non-major customers
The decline of interest-only lending has also been good for principal & interest borrowers.
For a start, it’s not just due to IO rate hikes, Mickenbecker told MPA. “Most of it happened earlier this year, but what’s happened in the meantime is that there’s been a heck of repricing down for owner-occupied, so it’s widened that differential.”
84 of the lenders on CANSTAR’s approximately 100-strong panel have P&I rates of below 4%.
Those IO borrowers still in the market should look at non-major and non-bank lenders. The price differential for IO vs P&I borrowers is far higher at the majors (on average 73 basis points for investors) than other lenders (24 basis points).
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