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FBAA voices concern over IO loan restrictions

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Reporter 4 minute read

The prudential regulator’s restrictions on the amount of interest-only loans that can be written by lenders could end up hurting small businesses, the Finance Brokers Association of Australia has warned.

Speaking after AFG released its mortgage index showing that just 19 per cent of home loans written in the second quarter of this financial year were interest-only (IO) loans, FBAA executive director Peter White warned that the restrictions could be negatively impacting small businesses.

Mr White commented: “It is important to remember when we discuss this subject that the vast majority of small businesses will borrow against their family home at some stage in their business life, and they need to be able to access the right style of debt for their business, which could well be IO.

“These restrictions may result in small business borrowers not being able to access the right style of debt, which could restrict their ability to expand or even to continue to operate.

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“This could have a major impact on small business in Australia.”

Noting that the Australian Prudential Regulation Authority (APRA) has stipulated that lenders should restrict IO loans to 30 per cent of new lending, Mr White called for the restriction to exclude SMEs.

“It’s tough enough for small business borrowers now in the lending arena without putting additional restrictions on them,” Mr White said.

“Our country is incredibly reliant on the successes of small business and we need regulations that help them succeed, not restrictions that help them fail.

“Small business lending should be dropped from these restrictions by APRA so that businesses can still access the [loan] they need as necessary.”

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[Related: Industry comments on interest-only lending changes]

FBAA voices concern over IO loan restrictions
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