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Advisers welcome interest-only boost

The Australian Prudential Regulation Authority has relaxed restrictions on interest-only lending, and mortgage advisers hope the decision will have a positive impact on New Zealand's lending market. 

Thursday, January 10th 2019, 8:27AM

APRA confirmed it is ending its supervisory benchmark on interest-only mortgage lending. Banks had been forced to limit interest-only lending to 30% of overall mortgage lending under the rules.

The interest-only limits, introduced last year, led to a sharp drop in interest-only lending in Australia and also in New Zealand, where the major four banks are Australian-owned. New Zealand interest-only lending volumes reached $1.6 billion in October, compared to $1.89 billion in October 2016.

Mortgage advisers say the APRA curbs have made it more difficult to obtain interest-only lending facilities for property investors. They also say lenders have forced clients through principal and interest (P&I) repayment calculations, affecting their overall ability to borrow on interest-only terms.

Advisers hope the Australian changes will see New Zealand's big banks become more receptive to interest-only lending once more. Squirrel's John Bolton said: "The market here was heavily influenced by APRA. One would expect the change in approach would gradually influence things over here. I don't think the Australian regulators want to see too much changed, but this will lead to a more informal approach, rather than a tough regulatory approach. It is nice to have the softer message. When you have a good customer pushed to P&I, it is frustrating having to fight to keep them on interest-only."

The Advice Group's Stephen Wilton also welcomed the news from across the Tasman. He described the development as "really good news for all borrowers". He added: "[There's] a lot of unnecessary admin going into some interest-only extension requests. Not all lending needs to be P&I to be responsible. In many cases you could actually argue that the additional cost and pressure of  the P&I loan was actually not responsible lending. There is also a place for interest only loans for all borrowers as it allows clients to repay other more expensive debt first."

Wilton added: "All we need now is a smart lender to include an actual interest-only servicing costs in their affordability calculators when a client call clearly demonstrate an ability to sell down and service the residual debt on their own residence."

APRA's decision to end interest-only restrictions comes as the country's major cities experience a sharp downturn in property prices. House prices in Sydney and Melbourne have dropped by 10% over the past year, with some market experts forecasting another 10% fall.

Tags: Lending regulation Squirrel

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Lender Flt 1yr 2yr 3yr
AIA - Back My Build 6.19 - - -
AIA - Go Home Loans 8.74 7.14 6.75 6.39
ANZ 8.64 ▼7.45 ▼7.09 ▼6.95
ANZ Blueprint to Build 7.39 - - -
ANZ Good Energy - - - 1.00
ANZ Special - ▼6.85 ▼6.49 ▼6.35
ASB Bank 8.64 7.14 6.75 6.39
ASB Better Homes Top Up - - - 1.00
Avanti Finance 9.15 - - -
Basecorp Finance 9.60 - - -
Bluestone 9.24 - - -
Lender Flt 1yr 2yr 3yr
BNZ - Classic - 7.14 6.79 6.65
BNZ - Green Home Loan top-ups - - - 1.00
BNZ - Mortgage One 8.69 - - -
BNZ - Rapid Repay 8.69 - - -
BNZ - Std, FlyBuys 8.69 7.74 7.39 7.25
BNZ - TotalMoney 8.69 - - -
CFML Loans 9.45 - - -
China Construction Bank - 7.09 6.75 6.49
China Construction Bank Special - - - -
Co-operative Bank - First Home Special - 6.79 - -
Co-operative Bank - Owner Occ 8.40 6.99 6.79 6.65
Lender Flt 1yr 2yr 3yr
Co-operative Bank - Standard 8.40 7.49 7.29 7.15
Credit Union Auckland 7.70 - - -
First Credit Union Special - 7.45 7.35 -
First Credit Union Standard 8.50 7.99 7.85 -
Heartland Bank - Online 7.99 6.89 6.55 6.35
Heartland Bank - Reverse Mortgage - - - -
Heretaunga Building Society 8.90 7.60 7.40 -
HSBC Premier 8.59 - - -
HSBC Premier LVR > 80% - - - -
HSBC Special - - - -
ICBC 7.85 7.05 6.69 6.59
Lender Flt 1yr 2yr 3yr
Kainga Ora 8.64 7.74 7.35 6.99
Kainga Ora - First Home Buyer Special - - - -
Kiwibank 8.50 7.99 7.79 7.55
Kiwibank - Offset 8.50 - - -
Kiwibank Special - 6.99 6.79 6.65
Liberty 8.59 8.69 8.79 8.94
Nelson Building Society 9.00 7.65 7.25 -
Pepper Money Advantage 10.49 - - -
Pepper Money Easy 8.69 - - -
Pepper Money Essential 8.29 - - -
SBS Bank 8.74 7.74 7.09 6.95
Lender Flt 1yr 2yr 3yr
SBS Bank Special - 7.14 6.49 6.35
SBS Construction lending for FHB - - - -
SBS FirstHome Combo 6.19 6.14 - -
SBS FirstHome Combo - - - -
SBS Unwind reverse equity 9.95 - - -
Select Home Loans 9.24 - - -
TSB Bank 9.44 7.79 7.55 7.45
TSB Special 8.64 6.99 6.75 6.65
Unity 8.64 6.99 6.79 -
Unity First Home Buyer special - 6.55 6.45 -
Wairarapa Building Society 8.60 6.95 6.85 -
Lender Flt 1yr 2yr 3yr
Westpac 8.64 ▼7.49 7.35 6.99
Westpac Choices Everyday 8.74 - - -
Westpac Offset 8.64 - - -
Westpac Special - ▼6.89 6.75 6.39
Median 8.64 7.14 6.82 6.65

Last updated: 18 July 2024 10:19am

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