From 1 January 2019 The Australian Prudential Regulation Authority (APRA) will be removing it’s 30% limit on interest only lending by ADI’s who have provided assurances on the strength of their standards.
APRA are still closely watching interest only loans to owner-occupiers which can be provided for limited duration. A borrowers capacity to borrow will still be determined based on principle and interest repayments and using minimum interest rate buffers.
In July 2018 (APRA) also removed its 10% pa restriction on most ADI’s loan books for residential lending to investors, originally introduced in 2014 in response to growing concerns about soaring house prices in major cities and investing lending practices.
So what does this mean for investors?
We could see even greater competition among lenders potentially with principal and interest investor rates moving closer to rates offered for owner occupiers. Lenders will also tend to moderate these rate reductions factoring in the increased cost of funding. Whilst it will be no race to match owner occupier interest rates, there may be some reduction in investor rates after January 2019. With the Financial Services Royal Commission final report being released in February 2019 … watch this space.
As always, The Home Loan Company is here to help you navigate through various speed bumps to ensure you achieve your goal so please let us know if you need guidance.