APRA lifts restriction on interest-only residential lending

20 December 2018

The Australian Prudential Regulation Authority will officially lift their restrictions on interest-only residential lending as of January 1 next year.

The loosening of the screws from the financial regulator is aimed at stabilising Australia’s spiraling housing market.

APRA brought in the restriction in early 2017 where they forced lenders to limit new interest-only lending to 30 per cent of residential home loans issued - and house prices have been heading south since then.

The restrictions led to banks lifting interest rates for investors and demanding bigger deposits.

It’s the second lever APRA has relaxed this year, after they removed the requirement on lenders to keep investor growth below 10 per cent each year.

APRA chairman Wayne Byres spoke to the ABC.

“APRA’s lending benchmarks on investor and interest-only lending were always intended to be temporary,” he said.

“Both have now served their purpose of moderating higher risk lending and supporting a gradual strengthening of lending standards across the industry over a number of years.”

CoreLogic head of research Cameron Kusher said he doubts it will affect property prices to any great extent.

“I don’t know these changes are that monumental,” he told ABC.

“If you look at lending to interest-only borrowers, it’s already sitting at about 16.5 per cent of new lending, when the cap is 30 per cent.”

“What it might do is make it easier for people who are coming to the end of their interest-only mortgages – or are getting into financial hardship – to refinance with a normal lender, without going to the non-bank sector.”

David Plank from the ANZ said APRA’s move is a strong sign that credit tightening in the country had gone far enough.

“I think the immediate impact of this announcement will be minimal in terms of how it will affect investors and the housing market but there’s a signal here in terms of the regulator’s intent,” he told Domain.

“It signals a changing intent on the direction of credit tightening.”

“What it says is they don’t want to see it go further…it’s about ensuring there’s not unnecessary tightening of credit.”


The best thing you might want to do if investing in commercial property is assemble a ‘dream team’ of experienced operators that understand the process and understand why you are investing.

Read more

Mortgage Professional Australia has announced that Perry Finance Director and Melbourne Finance & Equity Group CEO Cameron Perry is one of MPA’s Top Ranked Commercial Brokers of 2022.

Read more

Prospective home buyers and investors are being warned to temper their expectations as the dust settles on the Reserve Bank’s first interest rate rise in years.

Read more

The Reserve Bank this week pulled the trigger on interest rates as expected, hiking the official cash rate by 25 basis points to 0.35 per cent.

Read more