A report has revealed that demand for interest only home loan products is falling in South Australia.
According to Mortgage Choice’s latest home loan approval data, there has been a significant decline in the proportion of interest only loans written between April and September 2017.
The demand for interest only loans in SA dropped about 20% which suggests that the Australian Prudential Regulation Authority’s (APRA) caps on interest only lending are having the desired effect.
Interest only loans accounted for 13.89% of all home loans written in SA in September, down from 39.71% in April.
“In March, the Australian Prudential Regulation Authority ordered banks to limit their level of interest only loans to 30% of all new residential mortgages,” Mortgage Choice chief executive officer, John Flavell said.
“As a result, most lenders significantly increased their interest only home loan rates in a bid to cool this type of lending. Some lenders lifted their interest only rates by as much as 40 basis points, which has since caused demand for this type of product of drop.”
Flavell said that this drop in demand has led to some lenders starting to reduce rates on their interest only loans.
According to Flavell, that makes this a good time for borrowers and potential property buyers to speak with their mortgage broker.
“The fact is, there are still plenty of lending institutions that are more than happy to offer interest-only loans to owner-occupiers and investors. Borrowers will just need to show good reason for wanting an interest only loan,” he said.
Mortgage choice is an ASX listed company established in 1992 which aims to help Australians improve their financial situation, by offering a choice of home loan providers and expert advice from mortgage professionals.