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Australian regulator to remove cap on interest-only home loans

The Australian Prudential Regulation Authority will lift the limit on interest-only residential mortgage lending for banks, effective Jan. 1, 2019.

The benchmark was put in place as a temporary measure in March 2017 to boost sound lending practices, the regulator said in a Dec. 19 release.

This led to a significant decline in the proportion of new interest-only lending to below the 30% threshold.

The regulator noted that the restriction has served its purpose to moderate higher-risk lending.