Australia & New Zealand Banking Group Ltd. tightened rules on interest-only mortgage loans, saying it will step up its scrutiny of customers applying for such loans, The Sydney Morning Herald reported Feb. 23.
ANZ will no longer offer interest-only home loans to customers who are relying on a parent or another family member as a guarantor. The bank will also look into the financial circumstances of customers who are switching from a principal and interest product to an interest-only product and treat such changes as a "credit critical event."
The bank will also require full income verification for interest-only loan renewals.
ANZ made the changes as a switch to interest-only repayments was a "material" move that could increase the amount of repayments a customer makes and the bank wants to make sure customers discussed their circumstances with the bank.
Interest-only loans have been under increased regulatory scrutiny as they could lead to customers failing to pay down debts. The Australian Prudential Regulation Authority in 2017 required the proportion of new loans that are interest-only to fall to less than 30% from about 40%.