Invest
RBA takes aim at interest-only loans
The Reserve Bank has thrown its support behind the latest measures limiting interest-only loans, with RBA governor Philip Lowe hinting that current tax arrangements may be responsible for Australia’s record household debt level.
RBA takes aim at interest-only loans
The Reserve Bank has thrown its support behind the latest measures limiting interest-only loans, with RBA governor Philip Lowe hinting that current tax arrangements may be responsible for Australia’s record household debt level.
Speaking at the Reserve Bank board dinner last night in Melbourne, Mr Lowe said the move by regulatory bodies APRA and ASIC to tighten interest-only lending was supportive of a more sustainable and resilient housing market.
“Like the earlier ‘speed limits’ on investor lending, these new requirements should help the whole system pull back to a more sustainable position,” Mr Lowe said.
“Hopefully, the changes might encourage a few more people to think about the merit of taking out very large interest-only loans when interest rates are near historical lows.”
APRA said last week that interest-only loans should not exceed 30 per cent of new loans, while institutions have been instructed to limit those with high loan-to-valuation rations (LVRs).
Mr Lowe said the popularity of interest-only loans was fuelled in part by the flexibility of Australian mortgages.
“Many people with interest-only loans make significant payments into offset accounts rather than explicitly paying down principal,” he said.
“This flexibility, which is of value to many people, isn’t available in most countries.”
Mr Lowe also hinted that current tax arrangements may have contributed to Australia’s ongoing household debt issue, which has now risen to 187 per cent of income.
“A second factor is the taxation arrangements that apply to investment in residential property in Australia.”
However, despite the RBA welcoming “these and other prudential measures”, Mr Lowe maintains there are bigger drivers of the housing market.
“The availability of credit is undoubtedly a factor that can amplify demand, but it is not the root cause,” he said.
“It is hard to escape the conclusion that we need to address the supply side if we are to avoid ever-rising housing costs relative to our incomes and to avoid the attendant incentive to borrow that is created by rising housing prices.”
RELATED ARTICLES
Property
What Adds The Most Value To Properties?
Wondering how to up the value of your property? Properties are worth a lot of money in general, but there’s always a way to maximise value. The good news is that most of the things you can do to ...Read more
Property
Centuria reports strong growth in alternative real estate sectors for FY24
Centuria Capital Group has reported significant growth in alternative real estate sectors for the 2024 financial year, driving stable performance and increased guidance for FY25. Read more
Property
How to leverage equity in your home for investment or renovation
Home equity, the value of your property minus any debts owed, is a powerful financial resource many homeowners in Australia can utilize to further their financial goals. Whether you're looking to ...Read more
Property
Exploring REITs: Real estate investment without buying property
Real Estate Investment Trusts (REITs) offer a compelling investment alternative for those interested in the real estate market but may not want to endure the complexities and capital requirements of ...Read more
Property
Retirement communities: a pivotal element in meeting Australia's housing targets
The Retirement Living Council (RLC) has recommended that retirement communities should be considered a vital part in the Australian Government's initiative to fulfill the Housing Australia Future Fund ...Read more
Property
Australians adjust financial strategies amid changing property market dynamics
The 2023 calendar year saw Australian borrowers acquiring a total of $300.9 billion in new loans for property purchases, marking a 12.7% decrease from the previous year. Read more
Property
Split home loans unlocking doors for Aussie buyers
Australians are teaming up to dive into the real estate market and seize the advantages of home ownership, with the trend of split home loans surging as family and friends unite to buy properties ...Read more
Property
Real estate investment: Spotting high-growth potentials
Investing in real estate has long been a favoured approach for Australians looking to grow their wealth. Read more
Property
What Adds The Most Value To Properties?
Wondering how to up the value of your property? Properties are worth a lot of money in general, but there’s always a way to maximise value. The good news is that most of the things you can do to ...Read more
Property
Centuria reports strong growth in alternative real estate sectors for FY24
Centuria Capital Group has reported significant growth in alternative real estate sectors for the 2024 financial year, driving stable performance and increased guidance for FY25. Read more
Property
How to leverage equity in your home for investment or renovation
Home equity, the value of your property minus any debts owed, is a powerful financial resource many homeowners in Australia can utilize to further their financial goals. Whether you're looking to ...Read more
Property
Exploring REITs: Real estate investment without buying property
Real Estate Investment Trusts (REITs) offer a compelling investment alternative for those interested in the real estate market but may not want to endure the complexities and capital requirements of ...Read more
Property
Retirement communities: a pivotal element in meeting Australia's housing targets
The Retirement Living Council (RLC) has recommended that retirement communities should be considered a vital part in the Australian Government's initiative to fulfill the Housing Australia Future Fund ...Read more
Property
Australians adjust financial strategies amid changing property market dynamics
The 2023 calendar year saw Australian borrowers acquiring a total of $300.9 billion in new loans for property purchases, marking a 12.7% decrease from the previous year. Read more
Property
Split home loans unlocking doors for Aussie buyers
Australians are teaming up to dive into the real estate market and seize the advantages of home ownership, with the trend of split home loans surging as family and friends unite to buy properties ...Read more
Property
Real estate investment: Spotting high-growth potentials
Investing in real estate has long been a favoured approach for Australians looking to grow their wealth. Read more
