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APRA to remove banks' interest-only lending restrictions

The financial regulator will lift restrictions on interest-only residential lending from January 1 in an attempt to stabilise Australia's ailing housing market.

The Australian Prudential Regulation Authority (APRA) imposed the restrictions in March 2017 to force lenders to limit new interest-only lending to 30 per cent of home loans that they issue.

Australia's median property price experienced its sharpest drop since the global financial crisis earlier this month, with capital city values falling 0.9 per cent.

Sydney and Melbourne, the capitals that enjoyed the biggest property booms, were hit hardest — falling by 9.5 and 5.8 per cent from peak to trough.

It is the second lending restriction APRA has relaxed this year.

In April, the regulator removed a "speed limit" that it had imposed on lenders since 2014, requiring them to keep investor credit growth below 10 per cent each year .

"APRA's lending benchmarks on investor and interest-only lending were always intended to be temporary," APRA chairman Wayne Byres said.

Loans that brought down housing market making a comeback, experts warn

TAMPA — It's the return of loans that caused the housing market to crash. Some housing experts are warning subprime mortgages have made a comeback under a different name. But other housing experts insist they’re safer and helpful for Americans with less than stellar credit scores.

Subprime mortgages are the focus of Hollywood blockbuster, The Big Short. They're also the pin that burst the housing bubble.

“We had thousands of people who were seeking our services in a total panic," said Sylvia Alvarez. She's a U.S Housing and Urban Development approved housing counselor. She runs the nonprofit Housing & Education Alliance in Tampa.

Sylvia Alvarez helped many of her clients from losing it all. They were using these second-chance loans designed for people with low credit scores. They were approved for loans they could not afford.

“It’s a scary feeling," said Alvarez.

The crippling recession landed her in their shoes. She too lost her home: not to bad loans but to economic hardship.