Changing Loan to interest onlyOnly change loan to interest
The ANZ will intensify its screening of clients wishing to change to a purely interest-bearing mortgage loan as creditors take a more prudent stance on more risky mortgage lending. These four major banks also prohibit the use of interest-bearing home loan facilities by clients who rely on one of their parents or another member of their household to act as sponsor.
As ANZ said this weekend, it would consider changes in pure interest rate lending - such as an extension of the repayment period or a switch from a capital and interest rate instrument to one where they only paid interest - as a "credit crunch". This means that the EIB will increasingly examine the client's finances and motives for making such changes.
The ANZ said that it made the amendment because changing a loan into a loan with pure interest payments was an "essential" measure that could raise the overall repayment a client would make over the term of a loan. "to repay their debts as quickly as possible."
Amendments should ensure that clients review their situation with the institution when making changes that could lead to them receiving a longer-term loan with interest only. "Whilst only fixed rate credits are appropriate for some clients, we want to talk to them carefully about the conditions to make sure they have the right loan, even if a fixed rate maturity only expires," the spokesperson said.
Simultaneously, ANZ also established regulations to prevent only interest rate instruments from being used for guarantee credits - when a parents or other member of the household consents to intervene when the debtor cannot make repayment. Credits of this kind have become more and more attractive to first home purchasers as home values have skyrocketed in recent years - a tendency called the "bank of mothers and fathers".
Prudential Regulation Authority took action against this part of the prudential regulator last year, demanding that the share of new lending that only bears interest should drop from around 40 per cent to less than 30 per cent. However, the new prudential regulation authority has not yet been able to get a clear picture of the prudential regulation process. Last year, as a result of the increase in interest payments for pure interest rate clients, Germany's banking sector put the brake on the trend and called on new borrower groups to stunt larger deposit amounts.
The recent amendment to ANZ is another indication of the prudence of a large creditor.