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Non-major bank changes IO credit policy

aus wide bank

aus wide bank
Reporter 1 minute read

A non-major lender has announced that it is implementing a policy change for new and existing interest-only investment loans.

Auswide Bank says the new maximum loan-to-value ratio (LVR) on new and existing interest-only (IO) lending is now restricted to 80 per cent.

The change applies to all IO investment loans submitted after yesterday (8 June). However, any IO investment application submitted before this date “will need to be formally approved by Tuesday 20th June”.

The move is the latest in a succession of credit policy changes made by lenders since the Australian Prudential Regulation Authority told banks to limit the flow of new interest-only lending to 30 per cent and “place strict internal limits on the volume of interest-only lending at loan-to-value ratios above 80 per cent”.

Further to this, banks were advised to ensure that there is “scrutiny and justification of any instances of interest-only lending at an LVR above 90 per cent”.

Auswide Bank said it is “committed to meeting [its] regulatory requirements, and ensuring [it is] lending responsibly and in the best interests of our customers. Accordingly, [it is] implementing a policy change for investment lending interest-only applications.”

However, the bank said short-term IO periods of up to six months for building and construction loans will not be impacted.

[Related: Brokers slam APRA’s ‘sledgehammer’ approach to IO loans]

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