No further crackdown for interest-only customers: Mortgage Choice

Thoughts?

Crackdown on interest-only loans tipped to ease

"Banks will soon be comfortably meeting the regulator's cap on interest-only mortgage lending, and could partially unwind some of the tighter credit conditions being felt by many property investors, one of the country's biggest mortgage brokers predicts."

 

The difference between I/O and P&I might decrease a little. Lenders will have periods where they're hungry for business and this will be one of the tools they use to compete.

Let's not kid ourselves though. It's not going to be any where near what it used to be. APRAs requirements have been a bonanza for the banks. The cost of an interest only loan for the bank hasn't changed, but the revenue has increased. They're now the most profitable home loans the banks have and they'll be reluctant to give that up.

 

The rates are one problem. But the real issue is the strict serviceability calcs. Relax that and we'll have something to talk about.

 

Correct. Meeting the 30% quota for new business is the easy part. Maintaining it as new business comes in the door and existing business reaches its I/O expiry dates and seeks extensions is another thing entirely. There may be some slightly better deals on offer from time to time , but the 30% I/O quota hasnt changed, and the tighter servicing calculators are here to stay for the medium term as well... that P&I cliff hasnt become any less an issue for yield poor investors just because the short term target of 30% of NEW business has been met.