Lending Relief For Home Borrowers

The 1st of January marks the start of new beginnings for home borrowers when the Australian Prudential Regulation Authority (APRA) will lift the current interest-only lending restrictions.

Restrictions on interest only lending were imposed in March 2017 in a successful attempt to clean up the lending industry. The restrictions meant that lenders were forced to limit new interest-only lending to 30% of home loans they issued.

The Australian housing market has been the topic of harsh debate throughout the latter half of 2018, but a combination of market forces and changes in regulation are proving that the grass may really be greener on the 2019 side. Sydney and Melbourne’s house prices are falling, but as mentioned in a previous article, All Eyes on Brisbane, Brisbane has managed to escape the doom and gloom through leading house price growth. Combining this with APRA’s latest plan to loosen lending conditions, there isn’t a reason why borrowers and buyers in 2019 won’t be better off.

Research Director at RateCity, Sally Tindall predicts the loosening on interest-only lending will serve as just one of the many earmarks of an improving housing market, stating that banks will “re-open their books to interest-only customers, who are mainly investors”. With low investment being stated as a factor of housing decline, it is hoped that the new lending regulations will assist in driving growth in real estate investment circles. Tindall also believes that those with expiring interest only loans will receive a reprieve.

Greenlights – in lending terms – have also come from the RBA. Earlier this month, the RBA came out and deterred banks from being too cautious in their lending decisions. From lessons learnt during the GFC, the RBA believes that the continuity of low interest rates and the opening of credit are the best ports of call to keep Australia in the green. Guy Debelle, Deputy Governor of the RBA said the big four banks – which control 80% of the mortgage market – must be mindful of the need to keep allowing borrowers to borrow. “The lesson [from the GFC] is that countries that did that [loosened lending] fared better than countries that didn’t,” he said. The fact that APRA has now allowed banks to do this with their interest-only offerings serve as a signal for great things to come.

More positivity stems from JP Morgan’s Chief Economist who says that borrowers could save money from the change in regulation, stating "Interest-only loans were repriced quite significantly [higher] in the wake of this regulation, so there will likely be some reduction in rates for these loans," she said. Not only will lending be more available, but it will also be cheaper. Many say all roads lead to Rome, but at D’Arcys we believe they lead to property ownership.

If good news continues to hit our airways, then there is no reason why buying real estate in Brisbane in 2019 should be considered an outdated pipe dream. Many are predicting that this new relief in interest-only loans will fuel the south-east Queensland uplift in home value.

ALL EYES ON BRISBANE