CANBERRA: The Australian Prudential Regulation Authority (APRA) has clamped down on interest-only loans in a bid to cool the hot property market. The regulator said it had written to all lenders today, and said from now on interest-only loans must be restricted to 30 per cent of new residential mortgage loans. Interest-only lending represents nearly 40 per cent of the stock of residential mortgage lending by banks, which APRA said is “quite high” by international and historical standards. It said new supervisory measures in relation to the high level of interest-only lending is warranted, to ensure lenders recognised the heightened risk in the lending environment.
“APRA views a higher proportion of interest-only lending in the current environment to be indicative of a higher risk profile,” chairman Wayne Byres said in a statement. “We will therefore be monitoring the share of interest-only lending within total new mortgage lending for each [lender], and will consider the need to impose additional requirements… when the proportion of new lending on interest-only terms exceeds 30 per cent of total new mortgage lending.” Treasurer Scott Morrison welcomed APRA’s move, flagging increased pressure on past measures to combat risks in housing lending. “I have remarked upon the relatively high proportion of interest-only loans on housing lending and I welcome APRA’s tightening of lending standards in that area,” Mr Morrison said in a statement. “These latest measures follow actions which have strengthened mortgage lending standards and had a dampening impact on investor credit growth.”
