Advisers welcome interest-only boost

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."