Small lenders up interest-only mortgages

(Australian Associated Press)


Australia’s largest banks have pulled back on their interest-only home loan lending, but smaller banks and non-bank lenders have stepped up their use of higher interest rate lending practice.

In an update on its six month surveillance of 16 Australian lenders, the Australian Securities and Investments Commission said the big banks reduced interest-only lending by $4.5 billion over 12 months, but found that interest-only tightening was being offset by an increased use by smaller lenders.

The watchdog is ramping up its investigations into the banking industry’s rollout of interest-only loans after macroprudential regulators have sought to tighten the mortgages which are cheaper at the start of repayments but can jump in costs over the long-term, with potential implications for an overheating house market and record high household debt.

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