Australians are naturally cautious when it comes to interest-only home loans, with 46% of respondents saying they were “adamant decliners” of interest-only home loans, according to a new report by Gateway Credit Union.
Adamant decliners would never consider using interest-only loans due to the perception that they inflate debt. Twenty-five percent of respondents said they were “resistant approvers,” meaning they acknowledged the benefits of interest-only loans, yet chose not to utilise them.
Approximately one in ten (11%) consider themselves to be “hesitant compliers” and view interest-only loans as being “bad” but utilise them nevertheless. Nearly one in five (18%) call themselves “enthusiastic users,” saying they’ve used interest-only loans because they increase cash flow.
Paul Thomas, CEO of Gateway Credit Union, said the results indicate that Aussies are becoming more astute when it comes to choosing home loans.
“It’s encouraging to see [that] so many Australians are wary of the dangers around interest-only home loans,” he said. “While they do serve a purpose for some borrowers, the reality is, for many, the interest-only home loan can create a precarious situation. Especially if borrowers enter the loan without considering if they can service it once the interest-only period ends.
“With the regulatory limits placed on banking institutions earlier in the year to restrict interest-only loan growth to below 30 per cent, it will become more difficult for borrowers to obtain an interest-only loan. This may be problematic for refinancers in particular, who are looking to refinance to interest-only again and haven’t factored in principal-and-interest repayments.”