The number of new interest-only loans approved by banks has dropped by nearly half in one year, bringing the total proportion of these types of loans to 16.9 per cent, far below APRA’s new speed limit.
In March 2017, APRA wrote to ADIs advising that it expects the banks to limit the flow of new interest-only lending to 30 per cent of total new residential mortgage lending, among other measures.
According to APRA’s September Quarterly ADI Property Exposures report, the total new residential term loans to households that were interest-only (IO) totalled $16.6 billion, down from $30.1 billion the quarter before and from $35.1 billion in the same period in 2016.
The new figure shows that ADIs with greater than $1 billion of term loans (accounting for 98.7 per cent of loans held) had only approved 16.9 per cent of new IO loans.
In comparison, new IO loans accounted for 37 per cent of new residential term loans in the quarter ending September 2016.
This means that the number of new IO loans approved has decreased by just under 45 per cent in one year.
When looking at the new loans approved for the year ending 30 September 2017, IO loans accounted for 30.2 per cent (or $117 billion), down to $18.3 billion (or 13.5 per cent) from the year ending 30 September 2016.
Conversely, both new owner-occupier loans and investment loans increased from the previous year in the September quarter.
Owner-occupied loans increased by $5 billion (2 per cent) to $255.3 billion, making up 65.9 per cent of all new housing loans approved, while investment loans increased by $10.1 billion (8.3 per cent) to 131.9 billion, representing 31.4 per cent of all new housing loans approved.
Further, $54.9 billion (14.2 per cent) of new housing loans had a loan-to-variable rate (LVR) greater than 80 per cent and less than or equal to 90 per cent, an increase of $3.3 billion (6.4 per cent) from the previous year.
Meanwhile, $28.4 billion (7.3 per cent) of new housing loans has an LVR of more than 90 per cent, a $3.1 billion (9.9 per cent) decrease from the prior year.
Speaking of the figures, RateCity money editor Sally Tindall believes that the data is a “slam dunk for APRA”, suggesting that it is evidence that changes imposed by the regulator earlier this year have been effective.
“This has been a colossal turnaround in the way banks view interest-only terms,” Ms Tindall said.
[Related: Competition heats up for investor, IO loans]
Annie Kane is the editor of The Adviser magazine, Australia’s leading magazine for mortgage brokers. As well as writing news and features on the Australian mortgage market, financial regulation, fintechs and the wider lending market – Annie is also the host of the Elite Broker podcast and regulator contributor to the Mortgage Business Uncut podcast.
Before joining The Adviser team at Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.
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