ANZ changes rules to investment interest-only loans
ANZ has announced a drastic overhaul of its home lending products in an attempt to lure investors back to the property market.
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Investors with smaller deposits and access to longer interest-only periods are being lured back to the property market.
Despite a massive crackdown on mortgage lending in recent years by the prudential regulator, the Australian Prudential and Regulation Authority, ANZ has today issued a notice to mortgage brokers informing them of a drastic overhaul to interest-only investor loans.
In the update it informed brokers it would allow borrowers with a deposit as small as 10 per cent to be eligible to buy an investment property.
Previously investors had to front up with a 20 per cent deposit.
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The bank has also announced they would be extending the maximum interest-only lending period for investor loans from 5 to 10 years.
This means a customer would not have to pay anything off the principal loan sum for a decade.
Home Loan Experts’ managing director Otto Dargan said financial institutions had recently become “willing to consider interest-only loans.”
“Lenders are still required to prove the customer can afford the principal and interest repayments at the end of the interest-only term,” he said.
“So while some lenders offer a 10 year interest-only period very few people will qualify for this.”
Banks have come under intense pressure in recent months following the fallout from the financial services’ Royal Commission, a subdued property market and a drop in mortgage lending.
Latest Australian Bureau of Statistics data showed mortgage lending to households fell by 2.4 per cent in January, after a 3.6 per cent drop in December.
Home lending declined by more than 20 per cent in the last 12 months and has been the biggest fall in the past decade.
In the broker update ANZ said the key changes are for applications submitted from Monday, March 25.
“We continuously review our processes and policies to ensure we meet our objectives of doing the right thing by our customers, meeting community expectations and ensuring we have a prudent and balanced home loan portfolio,” ANZ said.
The Reserve Bank of Australia governor Philip Lowe said earlier this month some banks could have gone too fair in tightening lending.
“Credit conditions tightened more than was probably required,” he said.
“Now, as lenders continue to seek the right balance, we need to remember that it is important that banks are prepared to take credit risk,” he added.
Originally published as ANZ changes rules to investment interest-only loans
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