There is a looming interest-only loan crack down on major banks in Australia. A leading economist, Richard Holden, issued a warning early this week that the housing market could be going down for US-style meltdown as the intended crack down on interest-only mortgages forces homeowners to paying off the principal on their home loans.
It is believed that 40 percentage of new home buyers were issued with interest-only loans, making it easy to pay. But Richard Holden told reporters that the Australian Prudent Regulation Authority ordered the major lending institutions to reduce the volume of interest-only house loans to about 30 percent.
This might affect many borrowers who were enjoying low interest only loans, but with this new twist many of them will find it hard to pay extra cash toward the new schedule, interest and principal fortnightly. There will be trouble with mortgage payments and many will face bank repossessions.
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