RBA's Kent: fallout from interest-only loan expiries to be limited

The Reserve Bank of Australia's Assistant Christopher Kent gave some talking points about the interest-only loan lending practices in Australia, which the Australian regulator Australian Prudential Regulation Authority (ARPA) restricted to protect household debt levels.

Key highlights

Expects almost half a trillion (in AUD terms) of interest-only loans to expire by 2021.

Majority of borrowers have transitioned out of interest-only loans well.

Small minority of borrowers who cannot afford the step-up into principal plus interest payments.

Kent expects the overall impact of transition on household cash flows and thus consumption to be small.