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

Tom Watson

19 Dec 2018

redactor/hero-images/558/apra-lifts-interest-only-lending-cap_content.jpg

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.

RELATED: Give yourself a Christmas bonus with this easy home loan trick

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.”

RELATED: Bargains to record breakers: Australia’s cheapest and most expensive properties of 2018

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 loans today - rates updated daily

  • Promoted

    loans.com.au

    2.57% p.a. variable

    2.59% p.a.

    $1234

    Product details Close details
    Smart Home Loan 80

    A low-rate home loan that could save you thousands, with no ongoing fees plus unlimited extra repayments and free redraws. Mozo Experts Choice Low Cost Home Loan 2020.^ 20% deposit required. Limited time only.

    • 2.57% p.a. variable

    • 2.59% p.a.

    • $520

    • $0.00

    • $0.00

    • yes - free

    • yes - free

    • no

    • $520

    • 80.00%

    • $50,000

    • $1,000,000

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the Smart Home Loan 80

  • Promoted

    UBank

    2.59% p.a. variable

    2.59% p.a.

    $1234

    Product details Close details
    UHomeLoan - Discount Offer

    Enjoy a super low rate, $0 fees and easy application with the Mozo Experts Choice Home Lender Bank of the Year.^ Free redraw with flexible repayments. Min 20% deposit.

    • 2.59% p.a. variable

    • 2.59% p.a.

    • $0

    • $0.00

    • $0.00

    • yes - free

    • yes - free

    • no

    • $0

    • 80.00%

    • $200,000

    • -

    • Variable

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the UHomeLoan - Discount Offer

  • Promoted

    HSBC

    2.09% p.a.
    fixed 2 years

    2.98% p.a.

    $1234

    Product details Close details
    Fixed Rate Home Loan

    Have the security of a fixed rate for 2 years with the option to split with one of the HSBC variable Home Loans. No ongoing monthly service fees or annual fees. Mozo Experts Choice Fixed Home Loan 2020^

    • 2.09% p.a.
      fixed 2 years

    • 2.98% p.a.

    • $0

    • $0.00

    • $300.00

    • yes - free up to $10,000 p.a.

    • no

    • no

    • $0

    • 80.00%

    • $50,000

    • $7,500,000

    • Fixed

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the Fixed Rate Home Loan

  • Promoted

    Suncorp

    2.29% p.a.
    fixed 2 years

    3.32% p.a.

    $1234

    Product details Close details
    Fixed Home Loan Special Offer Home Package Plus

    No monthly account keeping fees & No loan establishment fee. Get a $2,000 cash bonus when you refinance with an eligible Suncorp Bank Home Loan of $250k+. T&Cs & eligibility criteria apply.

    • 2.29% p.a.
      fixed 2 years

    • 3.32% p.a.

    • $0

    • $375.00 yearly

    • $350.00

    • yes - free up to $500 per month

    • no

    • no

    • $0

    • 90.00%

    • $150,000

    • -

    • Fixed

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    • Refinance from another lender to receive a $2,000 cash bonus for loans of at least $250,000 or $3,000 bonus for loans over $750,000. Available for loans with an LVR <90% and applications made by 30 September 2020 and settled by 29 December 2020.

    Read our Mozo Review to learn more about the Fixed Home Loan Special Offer

  • Promoted

    Newcastle Permanent

    2.18% p.a.
    fixed 2 years

    3.72% p.a.

    $1234

    Product details Close details
    Special Fixed Rate Home Loan Premium Plus Package

    Enjoy a great low rate with no ongoing fees. Ability to split your loan between fixed and variable. 100% offset account. Extra repayments and redraw facility.

    • 2.18% p.a.
      fixed 2 years

    • 3.72% p.a.

    • $0

    • $395.00 yearly

    • $0.00

    • yes - free up to $25,000 p.a.

    • yes - free

    • no

    • $0

    • 80.00%

    • $5,000

    • -

    • Fixed

    • Principal & Interest

    • Owner Occupier

    • Weekly, Fortnightly, Monthly

    Read our Mozo Review to learn more about the Special Fixed Rate Home Loan

*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 the amount and term you entered.

**Initial monthly repayment figures are estimates only, based on the advertised rate, and a loan of $500,000 repaid over 25 years. 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.

Mozo may receive advertising fees from the financial institutions, issuers of financial or credit products and third party advice providers that are shown on this page. These fees are based on a cost per click, cost per acquisition, or a fixed fee.