WA home buyers and investors to benefit as APRA cuts restriction on interest only loans

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IN good news for home buyers and investors, the Australian Prudential Regulation Authority (APRA) will remove its cap on interest-only loans for residential property.

Under the cap, lenders had to limit new interest-only loans to 30 per cent of home loans issued.

It was put in place as a temporary measure in March 2017, as part of a range of actions to reinforce sound lending practice and led to a marked reduction in the proportion of new interest-only lending, which is now significantly below the 30 per cent threshold.

Chairman Wayne Byres said APRA’s lending benchmarks on investor and interest-only lending were always intended to be temporary.

“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,” he said.

The change will come into effect on January 1, 2019.

REIWA deputy president Lisa Joyce said loosening the restrictions was a win for WA home buyers and investors.

“When APRA originally introduced these tighter lending rules, the decision was made with the red-hot east coast markets, like Sydney and Melbourne, in mind,” she said.

“While this has had the desired effect of cooling house prices in those markets, it only served to further dampen the WA market.

“Now that these restrictions have been loosened, more West Australians will be able to access interest-only loans, making home ownership and property investment more affordable, which should help stimulate our local property market as it starts to recover.”

Following the negative impact these national rules had on the WA market, REIWA is calling on APRA to ensure WA is not further burdened by its national approach.

“We would like to see APRA move away from a blanket approach to introducing policies and instead consider the diversity of our national market by introducing state-by-state policies targeted at rectifying the issues affecting each individual state or territory,” Ms Joyce said.