Moves to dampen investment borrowing have been so effective, banks are now offering better rates for interest only loans

first_imgExperts predict levels of interest only loans may increase.DEMAND for interest only loans had dropped so substantially that some banks were reducing their rates to try and entice more borrowers.Moves to dampen enthusiasm for interest only loans earlier this year had, had a dramatic affect on that type of lending.According to Mortgage Choice’s latest home loan approval data, there has been a significant decline in the proportion of interest only loans written by the brokerage in Queensland between April and September 2017.At the time banks dramatically lifted their interest rates on these types of loans.More from newsMould, age, not enough to stop 17 bidders fighting for this homeless than 1 hour agoBuyers ‘crazy’ not to take govt freebies, says 28-yr-old investorless than 1 hour agoMortgage Choice Ormeau principal Deslie Taylor said in March this year the Australian Prudential Regulation Authority ordered banks to limit their level of interest only loans to 30 per cent of all new residential mortgages.As a result, many significantly increased interest only home loan rates to reduce the demand for this lending.“However, it seems for some lenders at least, the pendulum may have swung a little past its centre point and they are now working on bringing it back into place.’’Ms Taylor said in recent weeks lenders had started to reduce the rates on their interest only loans. This meant it was a good time she said for borrowers or those considering buying to look at what was available.“Borrowers will just need to show good reason for wanting an interest only loan,’’ she said.Mortgage Choice data showed that during September interest only loans accounted for 12.61 per cent of all home loans written in Queensland — down from 31.29 per cent in April.last_img