Lenders likely to limit interest only loans

23 June 2015
| By Nicholas |
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Interest only loans are forecast to become increasingly rare, as lenders reassess their practices in response to warns from the Australian Prudential Regulation Authority (APRA) about the need to slow credit growth.

Smartline personal mortgage advisers, executive director, Joe Sirianni, said that lenders were likely to restrict or reduce the number of interest only they offer, as a result of low interest rates and ARPA's call.

"We are now seeing lenders starting to actively raise the bar in terms of the requirements investors have to meet and the restriction of interest only loans will probably be one of those moves," he said.

With lending rated around 4.5 per cent, Sirianni said property investors should be looking to switch from interest only to principal and interest loans.

"There's really no need to have an interest only loan, whether you're an investor or owner-occupier," he said.

"The significant drop in interest rates in the past couple of years means principal and interest repayments are similar to what interest only were."

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