From Moody’s today:
An increase in the number of Australian “owner-occupier” home buyers who are taking out interest-only (IO) mortgages is credit negative for future Australian Residential Mortgage Backed Securities (RMBS) because such loans have a higher risk of delinquency and default, particularly if interest rates rise from their current record low levels.
Over the past year, a notable rise has occurred in the amount of IO loans in Australia and owner-occupiers — people who buy a home to live in, as opposed to investors who buy to rent out — are accounting for a growing share of these loans.