APRA announces removal of 30% interest-only lending cap from January 2019

By Tom Watson · · 2 min read
Fact Checked
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The Australian Prudential Regulation Authority (APRA) has today announced a plan to remove its 30% benchmark on interest-only residential mortgage lending from January 1, 2019.

The temporary ‘speed limit’, originally introduced in March 2017, was implemented by APRA in response to concerns over lending practices by Aussie banks and the soaring cost of property prices in major cities at the time.

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According to the authority, since its introduction the lending cap has led to a ‘marked reduction’ in the proportion of new interest-only lending, which now sits well below the 30% threshold.

“APRA’s lending benchmarks on investor and interest-only lending were always intended to be temporary,” said APRA Chairman, Wayne Byres, in a statement released this morning.

“Both have now served their purpose of moderating higher risk lending and supporting a gradual strengthening of lending standards across the industry over a number of years.”

What could the move mean for interest-only rates?

Since March 2017 when APRA’s measures were first put in place, interest-only home loan rates for both owner occupiers and investors have jumped.

According to the Mozo database, the average interest-only rate for an owner occupier (based on a loan amount of $400,000 and an LVR of 80%) in March 2017 was 4.50%*, while the current average is 4.83%.

The same upwards trend has played out for investor interest-only loans, with the average rate in the Mozo database having soared from 4.75% in March 2017 to a current average of 5.12%.    

However, according to Mozo’s Product Data Manager, Peter Marshall, that trend might be about to reverse for investor interest-only home loans.

“Rates have already been falling for investors making principal and interest repayments, but APRA’s announcement is likely to result in lenders reducing interest-only rates, mostly for investors,” he said.

“Owner occupiers can still expect to pay a decent premium for interest-only loans, but I think investor interest only rates are likely to start coming down by a meaningful amount.”

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Is investing in property one of your goals for 2019? Find a home loan to match your ambition by checking out some of the hot investor offers below, or head over to the Mozo home loan comparison hub for even more great offers.

*Rates have been rounded to two decimal places.  

Home loan comparisons on Mozo

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Last updated 27 July 2024 Important disclosures and comparison rate warning*

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    Initial monthly repayment
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    Built by CommBank, the Unloan is the first home loan with an increasing discount (conditions apply) for borrowers. No application or banking fees. No monthly account keeping or early exit fees. Apply online in minutes.

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    $3,043
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    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

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    Competitively-priced variable rate loan. Ideal for owner occupiers and investors. No service fees to pay. Make free extra repayments and redraws. Flexible repayment schedule available.

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    6.13 % p.a.
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    6.09 % p.a.
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    Comparison rate
    6.13 % p.a.
    Initial monthly repayment
    $3,027
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    6.14 % p.a.
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    6.16 % p.a.
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    $3,043
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    Enjoy a low rate home loan with $0 application fee and $0 ongoing fees. Flexibility to split your loan and set different repayment types. Fee free redraw from your loan using online banking. Flexible ways to repay. 40% Deposit required.

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  • Fixed Rate

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* WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan. The comparison rate displayed is for a secured loan with monthly principal and interest repayments for $150,000 over 25 years.

** Initial monthly repayment figures are estimates only, based on the advertised rate. You can change the loan amount and term in the input boxes at the top of this table. Rates, fees and charges and therefore the total cost of the loan may vary depending on your loan amount, loan term, and credit history. Actual repayments will depend on your individual circumstances and interest rate changes.

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