Regulators have set their sights on interest-only loans after interest-only loans as a percentage of new housing loan approvals reached a new high of 42.5% in the September 2014 quarter.
Through the Council of Financial Regulators, ASIC, APRA, the Reserve Bank and the Treasury are working together to monitor, assess and respond to risks in the housing market. The review follows concerns by regulators about higher-risk lending, following strong house price growth in Sydney and Melbourne.
ASIC has announced they will now begin an investigation into the provision of interest-only loans. The probe will look at the conduct of banks, including the big four, and non-bank lenders to assess how they are complying with important consumer protection laws, including their responsible lending obligations.
“While house prices have been experiencing growth in many parts of Australia, it remains critical that lenders are not putting consumers into unsuitable loans that could see them end up with unsustainable levels of debt,” ASIC Deputy Chairman Peter Kell said.
“Compliance with responsible lending laws is a key focus for ASIC. If our review identifies lenders’ conduct has fallen short, we will take appropriate enforcement action.”