ASIC to investigation interest only loans
On Tuesday 9 December 2014, ASIC announced that it will
conduct surveillance into interest only loans as part of a broader
review by regulators of home lending
standards.Hide
ASIC states that it will look at the conduct of lenders in
particular with regard to how they are complying with important
consumer protection laws, including their responsible lending
obligations.
The problem with interest only loans is that while repayments
are initially lower, that will only be in the initial interest only
period. Judgement day comes when the loans revert to principal and
interest repayment and increase in amount.
Regulators are concerned that some borrowers are choosing interest
only loans solely on the basis is that that is the only way they
can afford to buy the home they want to live in or alternatively,
in the case of an investment property, to minimise the differential
between rental income received and interest payments
