Major bank cuts LVR on IO loans

The big four bank has introduced new maximum LVRs as the start date for APRA’s 30% IO speed limit approaches

Major bank cuts LVR on IO loans

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National Australia Bank (NAB) has slashed the loan to valuation ratio (LVR) on its interest only loans as it works to fulfil new regulatory requirements.

The changes, effective from 10 June, will set the new maximum LVR for interest only loans at 80%. Previously, this sat at 95% for owner occupiers and 90% for investors.

“NAB is making changes to some of its policies regarding interest only home loans to ensure we continue to meet our regulatory requirements and responsible lending obligations,” the bank said in a broker note

These changes come into play as a result of the 30% cap on interest only lending set out by the Australian Prudential Regulation Authority (APRA) on 31 March. The regulator has requested that this speed limit be met by 1 July.

“As always, NAB wants to continue to ensure we provide customers with product solutions that are in line with their needs, and it is often the case that a principal and interest loan may be the most suitable arrangement.”

The new maximum LVR for construction loans has also been changed to 90%.

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