The Australian Prudential Regulation Authority says it will remove the cap on interest only mortgages
APRA put the cap in place to reduce the growth in these types of mortgages, thinking the rapid growth was a risk. This led to a large-scale switch over to principal and interest loans.
APRA now to wind back the restriction after what it says has been a marked reduction in IO lending. To be removed from January 1 2019
Reuters with the news.
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An implication of the APRA cap was that higher payments being forced on mortgagees (having to make principal payments in addition to interest instead of interest only) was thought to be reduced consumer discretionary spending and hence a weight on economic growth. Actually isolating the impact was and is difficult, but the argument makes sense. I guess the oppsite now applies.
