The Reserve Bank has revealed new statistics on new and existing residential mortgage lending by payment type – interest-only, and principal-and-interest loans.
Interest-only loans are defined as having no scheduled repayments. This includes revolving credit loans which have a fixed limit. Principal-and-interest loans are defined as having scheduled repayments and include revolving credit loans which have a scheduled reducing limit.
The numbers show that 60% of all new mortgage lending was on principal-and-interest payment terms in May 2016, while 40% was on interest-only payment terms. These proportions have been fairly stable since the data was first available in July 2015.
Interest-only loans tend to convert to principal-and-interest loans after a period of time, and Reserve Bank statistics show that only 28 percent of banks’ existing stock of mortgages are on interest-only payment terms.
Interest-only loans are less likely to have a loan-to-valuation ratio (LVR) above 80 percent, compared to principal-and-interest loans.
The new data has been collected from registered banks as part of regular surveys run by the Reserve Bank, and has recently undergone the necessary quality controls needed for it to be published alongside other Bank statistics.
The new mortgage lending statistics will be published monthly, while the data on all existing mortgages is available on a quarterly basis.