Benchmark lifted
APRA announced that the arbitrary benchmark cap on interest-only (IO) mortgage lending has now been removed.
Lending flows had been tracking a long way below the cap in any case, at about 16 per cent of new loans, perhaps in part to allow lenders some space for refinancing.
No firm view on prospective lending terms here, but this does theoretically mean that banks can write reasonable volumes while leaving some breathing space for refinancing where required.
The stock of IO loans by the end of the calendar year is likely to be around 25 per cent of residential term loans by value, down from 39 per cent at the peak, so the policies applied have been swift and very effective.
Still seeing the forensic enquiries into household expenses by twitchy lenders as a bigger challenge for the housing market, but it will be interesting to see whether mortgage rate differential for investor and IO loans now closes a little.
All of the major banks opened significantly higher in early trade, with Commonwealth Bank up 1.7 per cent, Westpac up 1.6 per cent, ANZ up 1.5 per cent, and NAB up 1.3 per cent.
