Mortgage rates set to climb even higher after APRA announces further lending crackdown
BORROWERS with interest-only payments are expected to get hit with even higher rates after a further lending crackdown was announced.
BORROWERS opting for interest-only deals are expected to get slugged with even higher rates after the banking regulator announced further crackdowns on lending.
The Australian Prudential and Regulation Authority sent a stern warning to all lenders, announcing it was imposing even tougher restrictions on their lending practices that would hinder their growth.
And the restrictions come down hardest on interest-only and investor lending.
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The restrictions limit the flow of interest-only lending to 30 per cent of total new mortgage lending and set strict internal limits on the volume of interest-only lending with loan-to-value ratios above 80 per cent.
It also includes strong scrutiny of interest-only lending for loan-to-value ratios above 90 per cent.
Industry experts including Home Loan Experts’ managing director Otto Dargan said these measures will mean more budget pain for borrowers.
“Borrowers are going to continue to see rate increases for the rest of this year, particularly for interest only loans and investment loans,’’ he said.
“Fifteen years ago it was normal to pay 1 per cent extra for an investment loan and that’s probably where we’ll end up.”
APRA’s chairman Wayne Byres said lending on interest-only terms represents nearly 40 per cent of all mortgage lending.
Last month the big four banks all upped interest rates in out-of-cycle moves hitting most borrowers and new analysis by financial comparison website Mozo shows 37 per cent of all lenders now have increased rate deals in the last two weeks.
The data showed investors on interest-only deals are the hardest hit — variable rate deals have been hiked by an average 24 basis points.
Investors paying principal and interest have seen prices rise on average by 21 basis points, while owner occupiers paying interest only have seen average rises of 11 basis points.
Owner occupiers on principal and interest deals on average by 9 basis points.
But there remains many variable and fixed rate deals for owner occupiers on the market below the four per cent mark.
Mozo spokeswoman Kirsty Lamont said the latest rises were a “kick in the teeth for loyal mortgage customers.”
“Borrowers looking for the biggest savings should look beyond the big banks and consider switching to an online or non bank lender as their rates are generally much more competitive,’’ she said.
The Reserve Bank of Australia board meets again on Tuesday.
Originally published as Mortgage rates set to climb even higher after APRA announces further lending crackdown
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