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APRA - The Australian Prudential Regulation Authority is a statutory authority of the Australian Government and the prudential regulator of the Australian financial services industry.
"Australian Prudential Regulation Authority (APRA) views a higher proportion of interest-only lending in the current environment to be indicative of a higher risk profile,” said APRA Chairman Wayne Byres. “We will therefore be monitoring the share of interest-only lending within total new mortgage lending for each [lender], and will consider the need to impose additional requirements ... when the proportion of new lending on interest-only terms exceeds 30 per cent of total new mortgage lending.”
What does that mean to investors?
The Australian Prudential Regulation Authority (APRA) announced new supervisory measures for banks. Moving forward, banks are now required to:
- Limit the flow of new interest-only lending to 30% of total new residential mortgage lending
- Place strict curbs on the volume of interest-only lending at loan-to-value ratios (LVRs) above 80%
- Ensure there is strong scrutiny and justification of interest-only lending at an LVR above 90%
So what does that really translate to for investors?
Simply put: It's going to be more challenging! Frankly, it makes it all the more important that prior to selecting or securing property a finance broker is provided complete transparency with investors financial information. That way investors very quickly have a crystal clear picture of what may or may not be possible in today's financial conditions.
Interest rates as they are - Money may still be very cheap, but it's getting far harder to get hold of it.
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