The Australian Securities and Investments Commission (ASIC) has today announced further measures to promote responsible lending in the home loan sector, which takes particular aim at interest-only mortgages:
ASIC today announced a targeted industry surveillance to examine whether lenders and mortgage brokers are inappropriately recommending more expensive interest-only loans. With many lenders, including major lenders, charging higher interest rates for interest-only loans compared with principal-and-interest loans, lenders and brokers must ensure that consumers are not provided with unsuitable interest-only loans.
Building on earlier work on home lending standards, ASIC is also announcing that eight major lenders will provide remediation to consumers who suffer financial difficulty as a result of shortcomings in past lending practices…
The eight lenders are:
Australia and New Zealand Banking Group Limited
Bendigo and Adelaide Bank Limited
Commonwealth Bank of Australia
Firstmac Limited
ING Bank (Australia) Limited
Macquarie Bank Limited
National Australia Bank Limited
Pepper Group Limited…Interest-only loans
ASIC will shortly commence a surveillance to identify lenders and mortgage brokers who are recommending high numbers of more expensive interest-only loans. Data will be gathered using ASIC’s compulsory information-gathering powers from large banks, other banks, mutual banks and non-bank lenders.
In an environment where many interest-only loans are now clearly more expensive than principal-and-interest loans, lenders and mortgage brokers must carefully consider the implications of providing borrowers with interest-only loans. While interest-only loans may be a reasonable option for some borrowers, for the vast majority of owner-occupiers in particular, an interest-only loan will not make sense…
