APRA’s removal of interest only loan caps - Implications for residential investors
APRA axes interest only loan caps
The Australian banking regulator, Australian Prudential Regulation Authority (APRA) has removed interest only lending restrictions, stating that existing caps had “served their purpose” in stabilising standards of lending and strengthening the environment of the industry.
With the final report for the Hayne Royal Commission scheduled for February 2019, both RBA governor Philip Lowe and Treasurer Josh Frydenberg have voiced concerns of the commission creating an environment catalysing a further credit squeeze.
APRA’s actions come partially in response to falling housing prices in Melbourne and Sydney, as less restricted access to the attractive form of credit through interest only loans allows for stimulation in residential investment.
The removal of restrictions became effective from 1 January 2019.
Outcomes for investors
No caps means a better deal for investors. The main benefit stemming from interest only loans is the lower monthly payments throughout the term of the loan, which in turn leads to maximisation of loan amounts.
With the removal of restrictions, greater borrowing power ensues for investors. A notable upwards repricing of interest only loans occurred in 2017 when the restrictions were first imposed. With the removal of such restrictions there is a foreseeable fall in rates for interest only loans and greater freedoms for residential investors in accessing credit.
Partners Wealth Group’s position
At its core, residential investment is about the realisation of hopes and dreams. Whether you are purchasing a place of your own, or an investment property for future income, residential property investment has a significant personal impact.
With the removal of caps on interest only loans, it is a perfect time to capitalise on better access to leverage for residential investment.
We provide a number of lending solutions to help you obtain the financing you need for residential investment. Our lending advisors can assist you in the establishment of interest only loans for residential investment, helping you achieve your investment goals.