Following APRA’s requirements to curb investor lending, one expert has claimed the big four banks have “overshot the mark”, and to rectify this short fall, investors could get a great deal on fixed rate interest-only lending.
New data from APRA’s December Quarterly ADI Property Exposures statistics has revealed interest-loans have fallen to historic lows, dropping from 36.26 per cent down to 15.22 per cent.
Speaking to Smart Property Investment, RateCity’s money editor Sally Tindall said this dip in APRA figures is directly related to the measures announced in March 2017, and the results today means the banks are convincing investors to go for principal and interest loans, and as a result have “really overshot the mark”.
“Property investors are people who particularly take advantage of interest-only loans, often for tax reasons, and the fact that the number of interest-only loans has plummeted is very telling,” Ms Tindall said.
“APRA asked [the banks] to cap all new interest-only lending to 30 per cent, and they’re down to almost 15 per cent. So, what we believe we’ll see is interest-only rates coming down as a result of this overshooting the mark.
“We’ve already seen the big four banks cut fixed rates for interest-only lending, and I do think we’ll see more rate cuts to come in the next few weeks.”
Simply put, she said future investors could be able to get cheaper rates, especially fixed rates.
“We’ve already seen a raft of changes come through, so in the last … month, we’ve seen all four of the big banks cut fixed interest-only rates, but there’s plenty more that they can cut, and we’re expecting that that gap between what someone pays on an interest-only loan versus what they pay on an principal and interest loan will narrow,” she said.
“Currently if you’re an investor and you want to pay interest-only, on average, you’re going to pay 39 basis points more. We believe that’s going to decrease over the coming months as the banks look to open up their books again to interest-only lending.
“In terms of fixing, we might see further cuts in that arena, in the fixed rate arena, but it really depends if you like the security of a fixed rate low more than anything else.”