eWombat Search

Latest Accounting News
Hot Issues
Resources to help understand and implement Single Touch Payroll (STP)
Big fines, prison on the cards as new SG penalties introduced
Extra website resources and tools is one way we offer you and your family more.
FBT Exemption for Various Work Vehicles
Tax payable on expenditure recoupments
ATO identifies SMSF contravention red flags
Who wins dispute about taxable income?
Australia - facts & figures March 2019
Strategies to handle scam phone calls and problem e-mails.
Instant asset write-off threshold upped to $25k
Jail time for GST fraud
Correcting GST Errors
Fuel tax credit rates raised
ATO set to contact clients for overdue TPAR
Reminder on Victoria Property Duties
How Australia is performing.
Global outlook summary: Down but not out
Bookkeepers remind on incoming TPRS obligations
Golden Rules for Deductions
How's Australia going - vital statistics?
Tax, SMEs set to be ‘political football’ in 2019 as election nears
Cap lifted on popular financing option for clients
Expiry of 900,000 interest-only loans set for January
Australian Taxation Office (ATO) Scam Alert: Fake Demands for Tax Payments
Tax Office sounds alarm on popular property strategy
Articles archive
Quarter 4 October - December 2018
Quarter 3 July - September 2018
Quarter 2 April - June 2018
Quarter 1 January - March 2018
Quarter 4 October - December 2017
Quarter 3 July - September 2017
Quarter 2 April - June 2017
Quarter 1 January - March 2017
Quarter 4 October - December 2016
Quarter 3 July - September 2016
Quarter 2 April - June 2016
Quarter 1 January - March 2016
Quarter 4 October - December 2015
Quarter 3 July - September 2015
Quarter 2 April - June 2015
Quarter 1 January - March 2015
Quarter 4 October - December 2014
Cap lifted on popular financing option for clients

APRA will remove its cap on interest-only loans from next year, a move which is set to open more financing options for clients in 2019.



       


 


From 1 January 2019, APRA will remove its 30 per cent limit on interest-only residential mortgage lending for banks and other lenders.


This cap was originally put in place in March 2017 in a bid to reinforce sound lending practices, and has resulted in a cooling down of the interest-only lending market.


According to APRA, the introduction of the benchmark has led to a marked reduction in the proportion of new interest-only lending, which is now significantly below the 30 per cent threshold.


What does this mean for property investors?


In short, this move opens up opportunity and competition in the lending market for investors in 2019.


“This enables us to have more conversations with clients about the choices that they’ve got, and the options for them with their properties,” mortgage broker and owner of Pink Finance Nicole Cannon told sister publication Smart Property Investment.


“The cap restricted how many lenders we could use, and some priced investment lending so that it’s not competitive. In some cases it’s almost just as cheap to do principal and interest as it is to do interest only, she added.


Ms Cannon believes the caps have “done their job” of educating investors about the pros and cons of interest-only loans.


“I don’t think lifting the cap will mean investors flock back to interest-only arrangements, but it does open up the conversation and options. I think the awareness is now out there to be mindful of product and structure, and ensure it meets your long term goals,” Ms Cannon said.


Approach with caution


APRA warned lenders that lifting the caps will not mean its supervision of interest-only lending practices is relaxed.


“In APRA’s view, interest-only mortgages, and in particular owner-occupied interest-only lending, remain a higher risk form of lending,” APRA said in a letter to authorised deposit taking institutions (ADIs).


“As a result, APRA expects that ADIs will maintain prudent internal risk limits on interest-only lending,” APRA said.


“These internal limits should cover both the level of new interest-only lending and the type, including lending on an interest-only basis to owner-occupiers and lending on an interest-only basis at high LVRs."


Access to finance has proven difficult for accountants and clients alike in recent months, in the wake of the royal commission and tougher regulatory conditions from APRA.


In September, interest-only loans represented 16.2 per cent, or $61.2 billion, of new home loan approvals, according to the latest data from APRA. This represents a 54.9 per cent pe in the last quarter


 


Katarina Taurian
19 December 2018
accountantsdaily.com.au


 




18th-January-2019
 

Stapleton Group: Suite C, 6 – 8 Floriston Road Boronia VIC 3155 | Phone: (03) 9760 7800 | Fax: (03) 9760 7860