A rise in certain mortgage rates is already underway with recent actions by the bank regulator putting a handbrake on interest-only home loans. Our finance team, Shore Financial, reports that some of the major banks have been told that less than 30% of new mortgages can be interest-only, a significant decrease to the last reported figures and a peak of 45% in 2014.
Christian Stevens of Shore Financial says, “There have been significant regulatory changes in the past 12 to 18 months, mainly around banks lending policies and affordability. Most importantly, there have been substantial changes in the past few months with regard to interest only and investment loans. APRA and ASIC have implemented a new requirement to the major banks to restructure their debt books enforcing a larger proportion of loans to be structured on principal and interest repayments.”
In the current climate of policy change and with interest rates starting to nudge upwards, Theo advises that buyers should carefully consider all their options.
Christian continues, “Second tier lenders are not being as heavily scrutinised and may be able to offer borrowers better loan funding terms compared with the major banks. In fact, some banks are now not even funding or refinancing any new investment or interest only loans and the difference between options and lenders can be as great as 1%.”