Interest only home loans back in force

The major banks are approving more interest-only home loans and high loan-to-value ratio loans. Home loans over 80 per cent of the property's value made up more than 30 per cent of approvals by the big banks in the June quarter, according to the Australian Prudential Regulation Authority. Interest-only lending made up about 40 per cent.

Subdued demand for credit has spurred a mortgage war among lenders, pushing borrowing rates down. Investors are using the cheap money to buy property, helping push up Sydney property prices.

Source: The Australian