Matt's Monday Minute: Principal and Interest - Flavour of the month?

May 08, 2017
Matt Spooner

Maybe… but the banks are still hungry for business.

Often times, as regulators such as APRA change policy, or force banks to slow down a particular type of lending; as we have recently seen with Interest Only Repayments, two things happen.

- One particular type of lending becomes the ‘flavour of the month’, and attracts great interest rates and products,

- Another type of lending suffers, with increased fees, interest rates, and more difficult credit approval conditions for new lending.

In recent days, Owner Occupied lending, with Principal and Interest Repayments are in, and Interest Only repayments are out.

This is generally thought to be the regulators trying to limit the amount of money Australians are borrowing, by removing the temptation of taking Interest Only Repayments, and also to try and slow down Investment Borrowings.

So – where does that leave you?

  • If you do fit into the category of Owner Occupier, and you are paying Principal and Interest, now can be a great time to make a real dent on that debt. However – it is absolutely critical that you talk to your broker today to ensure that you are on the right home loan product, not just one that looks great on paper.
  • If you are currently paying Interest Only, you can do one of two things:
    • Consider switching to Principal and Interest Repayments, and ‘make hay while the sun shines’ so to speak. By switching to P&I payments, you could take advantage of lower interest rates, and as above, have a good go at reducing the debt on your property.
    • Talk to your broker and see if another lender might be more accommodating. Not all lenders are penalising for Interest Only lending, and there are some out there who are still advertising very competitive rates. If your lender isn’t one of these, its time to make the switch to someone who is.


Posted in: Refinancing

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