ANZ is issuing ten-year IO mortgages… What does it mean?
So ANZ has broken ranks with the big four, and is aggressively targeting investors with a new ‘boom mortgage’.
That’s not what they’re calling it obviously. To them it’s just an interest-only mortgages with a ten-year interest only period.
But to me, that says ‘boom!’
From the SMH:
ANZ Banking Group is loosening some of the clamps it put on interest-only mortgage lending in 2017, after pledging to reopen the door to property investors following a period of excessive caution.
The big four lender on Thursday said it would again start offering customers an interest-only period of up to 10 years, up from five years now. It will also allow interest-only loans where a customer has a deposit of 10 per cent of a property's value, where previously it required a 20 per cent deposit.
The changes are a clear signal the bank is trying to spur growth in the housing investor market, where interest-only loans are most popular, after chief executive Shayne Elliott last month admitted it had been “overly conservative”.
It is also the latest sign of a loosening in restrictions on investor and interest-only loan growth, after the Australian Prudential Regulation Authority (APRA) late last year removed caps on these types of mortgages.
“On recent review, we have made a decision to increase our focus on the investor market. The upcoming changes demonstrate our continued appetite in the investor market, whilst ensuring we remain in line with our APRA requirements,” ANZ said.
Latest Reserve Bank figures show housing investor credit growth was just 1 per cent in the year to January. ANZ last month said its housing investor loan book shrank 3.8 per cent in 2018.
The remainder of the big-four already offer IO mortgages with a 10% deposit, so that’s not a huge change. But 10-year interest only periods… that’s pretty aggressive.
I did look into it, and it’s not going to be available to everyone. They’re going to be assessed at a minimum floor rate of 8.25%, which is a very high hurdle to cross. They’re marketed only for high-income professionals with stable jobs.
Still, it’s an interesting change in direction.
Over the past year or so, we haven’t seen any news that has pointed to a looser credit environment. It’s all been about how much tougher credit conditions have been getting.
So this is a real break in direction.
It signals that either
- APRA is now willing to back off a bit; or
- The banks have stopped caring what APRA thinks
Both are bullish signs for the market.
And if the market recalibrates so that ten-year interest only mortgages are the norm, that will give prices a boost. It increases the amount that people are able to borrow and service, and increases in borrowing capacity mean increases in prices.
So something has shifted here. There’s a break in the weather. A change in the wind.
It’s not exactly clear what it is, but either way it’s a big boost to the market.