Risky loans on the rise, but APRA bats away concerns
Record low interest rates have triggered a rush towards the property market, raising concerns that borrowers are overextending themselves in a bid to purchase their dream home.
Recent data from APRA shows the share of new borrowers with a debt-to-income (DTI) ratio of six or higher rose by 17.2% over the December 2020 quarter. The number of high LVR home loans also reached 42%, up from 39.9% in the previous quarter.
But the industry regulator has shown no sign it intends to intervene, saying that overall lending processes had not yet begun to deteriorate.
“Despite the increase in new higher LVR lending in the December 2020 quarter, the majority of outstanding residential mortgage loans remain well covered by collateral,” it said.
“The share of high DTI lending in the December 2020 quarter is within its historical average, and does not indicate a significant change in lending conditions.”
The percentage of interest-only loans has also been trending downwards. In the December quarter they made up 14.5% of outstanding term loans, down from 15.2% in the previous period.
CoreLogic head of residential research, Eliza Owen said the increases in high DTI and LVR lending were “not likely to be large enough to trigger a regulatory response,” but a tightening of credit policies should be expected if the trend continues.
RELATED: How are responsible lending laws changing in 2021?
Regulators will be monitoring the Sydney and Melbourne property markets in particular, given that house price to income ratios have historically been the highest in the two major cities.
“As housing prices rise at a time when incomes are expected to remain relatively flat, there is the potential for both loan-to-income and debt-to-income ratios to lift further, which is likely to be seen as a riskier outcome by regulators,” Owen said.
A lift in mortgages lent on interest-only terms could also see household debt get out of hand, particularly if the RBA decides to raise official interest rates in the coming years.
Despite this, the government is currently mulling over the repeal of responsible lending laws, which it hopes will free up the flow of credit further still.
The proposed changes have drawn criticism, especially since existing guidelines haven’t necessarily inhibited borrowing, with ABS data showing residential mortgage lending increasing by 10.5% in January alone.
But industry figures have spoken out in favour of the changes, with NAB CEO Ross McEwan arguing that deregulation will not lead to an increase in risky loans but an improved application experience for borrowers.
“We have no interest in lending money to customers who can’t pay it back because the customer loses and the bank loses,” he said at a parliamentary hearing last week.
Home loan comparisons on Mozo - last updated 28 March 2024
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Offset Home Loan
Package, Owner Occupier, LVR<60%, Principal & Interest
interest rate
comparison rate
Initial monthly repayment6.15% p.a. variable6.40% p.a.Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.
CompareCompareOffset Home Loan
Ability to open up to 10 offset accounts per loan account. Fast online application. Linked Debit Mastercard® with fee-free access at ATMs across Australia. Package a credit card with your home loan and the annual card fee will be waived (T&Cs apply). 40% deposit required.
- interest rate
- 6.15% p.a. variable
- comparison rate
- 6.40% p.a.
- interest rate
- 6.15% p.a. variable
- comparison rate
- 6.40% p.a.
- Upfront fees
- $350
- Ongoing fees
- $248.00 yearly
- Discharge Fee
- $400.00
- Extra repayments
- yes - free
- Redraw facility
- yes - free
- Offset account
- yes
- Maximum loan to value ratio
- 60.00%
- minimum borrowing amount
- $150,000
- maximum borrowing amount
- $10,000,000
- type of mortgage
- Variable
- Repayment types
- Principal & Interest
- Availability
- Owner Occupier
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- Monthly
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- -
Read our Mozo Review to learn more about the Macquarie Offset Home Loan
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Mozo experts choice awards won:
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Express Home Loan
Owner Occupier, Principal & Interest, LVR <90%
interest rate
comparison rate
Initial monthly repayment6.01% p.a. variable6.14% p.a.Get fast online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.
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Get fast online approval from the award-winning Bendigo Bank Express Home Loan. Multiple offset accounts and redraw available. 100% offset on variable rate loans and partial offset on fixed rate. Flexible repayment options. New home loans only.
- interest rate
- 6.01% p.a. variable
- comparison rate
- 6.14% p.a.
- interest rate
- 6.01% p.a. variable
- comparison rate
- 6.14% p.a.
- Upfront fees
- $134
- Ongoing fees
- $10.00 monthly
- Discharge Fee
- $350.00
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- 90.00%
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- $5,000
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- Variable
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- Principal & Interest
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Read our Mozo Review to learn more about the Bendigo Bank Express Home Loan
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Mozo experts choice awards won:
- Fixed Rate Home Loan - 2024
- Investor Fixed Home Loan - 2024
Fixed Rate Home Loan
Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment5.99% p.a.
fixed 2 years6.24% p.a.Secure a low rate and enjoy the certainty of repayments, with the BCU Fixed Rate Home Loan. Save with no ongoing annual fees. Pay up to $25,000 extra during a fixed period (T&Cs apply). Lock in for up to 5 years.
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Secure a low rate and enjoy the certainty of repayments, with the BCU Fixed Rate Home Loan. Save with no ongoing annual fees. Pay up to $25,000 extra during a fixed period (T&Cs apply). Lock in for up to 5 years.
- interest rate
- 6.29% p.a.
fixed 3 years
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- 6.30% p.a.
- interest rate
- 6.29% p.a.
fixed 3 years
- comparison rate
- 6.30% p.a.
- Upfront fees
- $0
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- $0.00
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- $395.00
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- yes, up to $25,000 during fixed period - fee applies
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- no
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- no
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- 95.00%
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- $20,000
- maximum borrowing amount
- $2,500,000
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- Fixed
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- Principal & Interest
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- Owner Occupier
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- Weekly, Fortnightly, Monthly
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- -
Read our Mozo Review to learn more about the BCU Bank Fixed Rate Home Loan
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Featured Product
Ultra Low Rate <95% LVR
Owner Occupier, Principal & Interest
interest rate
comparison rate
Initial monthly repayment6.30% p.a. variable6.58% p.a.Only 5% deposit required to apply. Low upfront costs to pay. No LMI Required. Unlimited Redraw and additional repayments. No Application or ongoing fees. No guarantors or equity sharing required. New Purchase - Metro only.
CompareCompareUltra Low Rate <95% LVR
Only 5% deposit required to apply. Low upfront costs to pay. No LMI Required. Unlimited Redraw and additional repayments. No Application or ongoing fees. No guarantors or equity sharing required. New Purchase - Metro only.
- interest rate
- 6.30% p.a. variable
- comparison rate
- 6.58% p.a.
- interest rate
- 6.30% p.a. variable
- comparison rate
- 6.58% p.a.
- Upfront fees
- $790
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- $0.00
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- $795.00
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- yes - free
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- $350,000
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- Variable
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Featured Product
Mozo experts choice awards won:
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Unloan Variable
Owner Occupier, Refinance Only, LVR <80%
interest rate
comparison rate
Initial monthly repayment5.99% p.a. variable5.90% p.a.For refinancers only. 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 in as little as 10 minutes.
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For refinancers only. 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 in as little as 10 minutes.
- interest rate
- 5.99% p.a. variable
- comparison rate
- 5.90% p.a.
- interest rate
- 5.99% p.a. variable
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- Upfront fees
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- minimum borrowing amount
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- maximum borrowing amount
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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.
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