National diversified developer Fortis has officially launched Crest &amp; Walker, its latest Brisbane apartment development, with construction now underway on the 20-storey Newstead project.

Award-winning builder BINAH has commenced construction on the Bureau^Proberts-designed building, which will deliver a limited collection of 65 two and three-bedroom apartments on Kyabra Street.

[smartcode_project:default project_id=145922 project_image_fid=373556]

The project marks Fortis' fourth active residential development in Brisbane, following River House, which is nearing completion, alongside projects in New Farm and Hamilton as the national developer continues to expand its South East Queensland pipeline.

Fortis General Manager – Development Queensland Dan Boman said Crest &amp; Walker reflects the developer's long-term commitment to delivering design-led residential projects in Brisbane's established inner-city suburbs.

"We're proud to be strengthening our presence in Brisbane with Crest &amp; Walker, particularly in such a sought-after lifestyle destination as Newstead," Boman said.

"Every Fortis project is shaped by its context, and we approach each one with the respect and care it deserves.

"Our focus is always on creating places that feel connected to their neighbourhood and elevate the everyday experience for residents. Newstead continues to evolve as one of Brisbane's most sought-after urban communities, and Crest &amp; Walker reflects our ambition to contribute meaningfully to that story."

[smartcode_project:default project_id=145922 project_image_fid=373559]

Positioned between Gasworks Plaza and James Street, <a href="https://www.apartments.com.au/new-apartments/crest-walker-newstead-12-kyabra-street-newstead-qld-4006">Crest &amp; Walker</a> has been designed as a boutique residential address offering privacy and generous living spaces within one of Brisbane's most established lifestyle precincts.

The building features a contemporary brick podium softened by integrated landscaping, while the upper levels are characterised by restrained architecture and enduring materiality. Interiors have been designed to maximise natural light, acoustic performance and long-term liveability.

[smartcode_project:default project_id=145922 project_image_fid=373583]

Residences comprise spacious two and three-bedroom floorplans, with two-bedroom apartments priced from $1.55 million and three-bedroom, half-floor residences from $3.95 million.

Residents will have access to a wellness-focused rooftop featuring a swimming pool, sauna, steam room, landscaped dining spaces and outdoor lounge areas overlooking Newstead and the Brisbane CBD.

[smartcode_project:default project_id=145922 project_image_fid=373571]

Sales are being managed by Slaite Projects, with Fortis expecting strong demand from owner-occupiers seeking a high-quality, design-focused apartment in one of Brisbane's most tightly held inner-city suburbs.

Completion of Crest &amp; Walker is slated for late 2028.

[smartcode_project_cta:default project_id=145922]

Joel Robinson

Fortis expands Brisbane pipeline with launch of Crest & Walker in Newstead

The enormity of delivering a true skyscraper in Australia's new development market is often overlooked.

It has taken the best part of a decade since plans for Chevron One were first unveiled, but the 52-storey tower is now complete, with residents collecting their keys and moving into what has become one of the Gold Coast's most recognisable new landmarks.

Rising 127 metres above Chevron Island, Chevron One stands almost twice as high as any other building on the island. Its scale places it alongside the trio of towers at Jewel, arguably the last truly significant addition to the central Gold Coast skyline when they were completed around six years ago.

While there are several developments underway around a similar height to Chevron One, they are more concentrated within clusters of the highest towers in the city. The fact Chevron One sits within a developing precinct, looking back at the other high-rise developments in Surfers Paradise and Broadbeach, makes it a different proposition altogether. It will certainly become a reference point on the Gold Coast skyline.

[smartcode_project:default project_id=6515 project_image_fid=68833]

Developer Bensons Property Group is behind the 52-storey tower, which has just shy of 250 apartments, along with an exhaustive list of resident amenity spread across what is the largest development site ever assembled on Chevron Island.

The tower has been the talk of the town for years, says Ray White Projects Gold Coast agent Caitlin Rosenboom, who is selling the remaining apartments.

"People have been watching Chevron One go up for years," Rosenboom says, adding that many prospective buyers have been surprised by the scale of the views once they step inside.

"It's only when they walk through a completed apartment that they truly understand the position of the building," Rosenboom says.

"The views are jaw-dropping. Whether you're looking east over the ocean, across Surfers Paradise, along the river systems or out to the hinterland, every level offers something different but equally impressive."

[smartcode_project:default project_id=6515 project_image_fid=360215]

One of Chevron One's defining advantages is its location on the eastern side of Chevron Island on Stanhill Drive, a position which protects the views forever.

"There's only one row of houses between Chevron One and the water, and the height restrictions along the river means views from Chevron One can never be built out,"&nbsp;Rosenboom says.

While new apartment developments continue to emerge across the Gold Coast, Rosenboom says opportunities to secure a completed apartment with this level of outlook are becoming increasingly rare.

"The size of the site is something that would be incredibly difficult to replicate today," she says.

"That's allowed Chevron One to deliver the sort of amenity, open space and resident facilities that very few projects can offer. There are not many completed apartment buildings on the Gold Coast right now that can compete with the combination of scale, quality and amenity."

[smartcode_project:default project_id=6515 project_image_fid=68839]

There's around 2,000 sqm of amenity solely for the use of residents of Chevron One. Club One features a uniquely shaped swimming pool that mirrors the footprint of the building itself, set within a extensively landscaped gardens. There's also an indoor pool and spa, a fully equipped gym with a Pilates room, a yoga garden, a bookable private dining area and lounge that can host up to 30 people, and a 24-hour concierge service.

As for the buyers, Rosenboom is fielding enquiry from everywhere: Sydneysiders and Melburnians looking at the new and off-the-plan market following the changes in the Federal Budget, as well as those looking to relocate, through to South East Queenslanders seeking either a permanent home or a weekender bolthole.

"The Gold Coast lifestyle continues to resonate with people relocating from the southern states, and when they see the views and the quality of what's been delivered at Chevron One, it becomes very easy for them to understand the appeal," Rosenboom says.

A diverse mix of one, two and three-bedroom apartments remain available, with each offering "something a little different", be it the orientation and views, configuration, or level, to suit a wide variety of buyers.

The remaining apartments are ready to inspect in person, by appointment.

[smartcode_project_cta:default project_id=6515]

A decade in the making: Residents to move into Chevron One as construction wraps up

A general rule of thumb in new apartment developments is that the penthouses get the rooftop.

It's a formula that's become commonplace across Australia's apartment market. Residents might have access to a pool, gym or barbecue facilities on a dedicated lower level, but the most desirable outdoor spaces are typically reserved for the highest-priced homes at the top of the building.

<a href="https://www.apartments.com.au/developers/sherpa-property-group">Sherpa Property Group</a> has taken the opposite approach.

Rather than dedicating the rooftop to a handful of buyers, the Gold Coast developer has made it the centrepiece of its Flourish collection, creating expansive shared spaces from the best vantage point in the building.

The philosophy has reached its most ambitious expression at <a href="https://www.apartments.com.au/new-apartments/flourish-soleira-palm-beach-1150-1160-gold-coast-highway-palm-beach-qld-4221">Flourish Soleira</a> in Palm Beach, where two rooftop precincts connected by a skybridge will deliver one of the most extensive lifestyle offerings seen in a residential apartment project on the Gold Coast.

[smartcode_project:default project_id=150017 project_image_fid=374053]

"We're seeing a clear move toward developments that offer more than just an apartment," Sherpa Group founder Christie Leet said.

"People want spaces that support how they actually live, whether that's working from home, staying active, or spending time with family and friends.

"That's where amenity becomes critical. It's not just about what's included, but how those spaces are designed to be used every day."

[smartcode_project:default project_id=150017 project_image_fid=374052]

The breadth of amenity has already attracted buyers across multiple demographics. Younger first home buyers have been drawn to Soleira's one-bedroom apartments, a product rarely delivered in Palm Beach, while families have responded to practical inclusions such as the shallow children's pool adjoining the main lap pool and the extensive communal recreation areas.

Instead of a single rooftop, Soleira delivers two distinct lifestyle zones.

[smartcode_project:default project_id=150017 project_image_fid=372547]

The southern rooftop has been dedicated to wellness, featuring a gym, yoga and Pilates studio, work-from-home facilities, a wellness centre, spa, and hot and cold plunge pools.

The northern rooftop focuses on recreation and entertaining, incorporating a heated resort-style pool, private dining rooms, pizza ovens, barbecues, a golf simulator, children's recreation areas, and what is expected to be the Gold Coast's first rooftop basketball court, which will also double as a squash court.

[smartcode_project:default project_id=150017 project_image_fid=374054]

Beyond the rooftops, Soleira will introduce 1,500 sqm of curated retail beneath the towers, creating one of Palm Beach's first genuinely mixed-use lifestyle precincts where cafés, restaurants and convenience retail become part of residents' everyday lives.

Sherpa has also retained management rights across the development, allowing it to oversee the long-term operation of the building through a 24-hour concierge model. The developer is also exploring additional revenue streams within the precinct aimed at helping offset ongoing body corporate costs for residents.

[smartcode_project:default project_id=150017 project_image_fid=370962]

While Soleira is the largest project Sherpa has delivered, the rooftop-first philosophy has been evolving for several years.

It began with <a href="https://www.apartments.com.au/new-apartments/amargo-6-12-sixth-avenue-palm-beach-qld-4221">Flourish Amargo</a>, the first project released under the Flourish brand. Rather than competing at the ultra-luxury end of the market with oversized half-floor and full-floor residences, Sherpa focused on creating lifestyle-driven apartments supported by resort-style shared spaces.

Amargo introduced more than 800 sqm of rooftop amenity, combining wellness facilities, heated pools, entertaining areas, cabanas, pizza ovens and private dining spaces into what was designed as an extension of residents' homes rather than a facility used only occasionally.

[smartcode_project:default project_id=146527 project_image_fid=366550]

That approach continued with Flourish Oasis, where the same amenity-led philosophy was refined into a more boutique development. Strong demand from Sherpa's growing VIP database saw much of the project sold before it reached the broader market, reinforcing buyer appetite for apartment communities centred around shared lifestyle experiences.

Flourish Amargo is slated for completion mid-way-through next year, with Oasis to be delivered by late 2027. Flourish Soleira is expected to complete in 2030.

[smartcode_project_cta:default project_id=150017]

Sherpa takes amenity to the sky as Flourish Soleira captures booming Palm Beach demand

As apartment living continues to evolve across Sydney's growth corridors, the quality and distribution of shared spaces is increasingly shaping how residents experience home. Rather than functioning as add-ons, amenities are being embedded into the daily rhythm of a building, supporting everything from quiet retreat to social interaction, often within a single vertical community.

At <a href="https://www.apartments.com.au/new-apartments/aeris-melrose-park-nursery-street-melrose-park-nsw-2114">Aeris</a> in Melrose Park, this approach is resolved through a layered amenity offering that unfolds from ground level through to its upper podium. Developed by <a href="https://www.apartments.com.au/developers/sekisui-house-australia">Sekisui House Australia</a> in partnership with Hankyu Hanshin Properties, the project introduces 468 apartments across two towers and a mid-rise building, positioned at the highest point of the broader masterplan.

[smartcode_project:default project_id=426 project_image_fid=359199]

The amenity experience begins at street level, where two courtyards sit within a landscaped setting that connects residents to the wider network of parks and green spaces. These green spaces are not isolated pockets but part of a wider pedestrian network that links Aeris to the surrounding <a href="https://www.apartments.com.au/developments/melrose-park-nsw-2114">Melrose Park</a> precinct, including Central Park, future schools, and the Town Centre opening in July 2026. The result is a transition that moves from public to private without abrupt boundaries, allowing residents to pass through shaded, tree-lined environments before reaching the building itself.

Moving upward, the focus shifts to the level five podium, where the primary communal facilities are concentrated. This space brings together a 16-metre swimming pool, outdoor seating areas, and a communal BBQ zone arranged to take advantage of elevated outlooks. Seating is positioned beneath pergolas, creating pockets of shade that extend the usability of the space throughout the day. The pool edge aligns with views toward the wider district, reinforcing the sense of elevation that defines the project’s positioning.

In the adjacent building, this is complemented by quieter, more contemplative spaces, including an outdoor cinema set within the same level. Positioned to operate primarily in the evening, it introduces a different tempo to the shared environment, shifting from daytime activity to after-hours use without requiring separate zones.

[smartcode_project:default project_id=426 project_image_fid=360299]

The podium also accommodates an intimate private resident gym. Located on the lower levels, it gives residents convenient access to fitness facilities without leaving the building.

Above, the elevated podium sky deck extends the amenity offering, providing additional open-air spaces with elevated outlooks across the surrounding landscape. While more restrained in program, this upper level reinforces the project’s vertical progression, from ground-level greenery to elevated outlook, allowing residents to move between distinct spatial conditions within a single address.

This distribution of amenities reflects a deliberate response to how residents use space across the day. Sekisui House Australia Sales and Marketing Director Peter Kalaf points to the role these shared areas play in shaping buyer demand. Aeris has been conceived as more than a collection of apartments, with the podium pool, gym and outdoor cinema forming part of a broader lifestyle offering that extends the home beyond each individual residence.

[smartcode_project:default project_id=426 project_image_fid=360300]

What distinguishes Aeris is not the inclusion of these elements individually, but how they are arranged in relation to one another. Active, social, and passive spaces are layered vertically rather than separated, allowing residents to choose between them without leaving the building or moving far from their apartment. This proximity supports both routine use, such as a morning swim or evening workout, and more occasional gatherings, whether around the BBQ area or within the cinema setting.

The amenity design also sits within a broader framework of connectivity across Melrose Park. The Melrose Park Town Centre, anchored by Coles and Dan Murphys, features a mix of retail, dining, health and lifestyle offerings, bringing everyday convenience closer to residents. By the end of the year, more than five hectares of parks and open space, equivalent to around seven football fields of green space on residents' doorstep, will further enhance the precinct, allowing the internal facilities at Aeris to operate as an extension of the wider neighbourhood rather than a substitute for it.

Construction at Aeris continues to gather momentum, with ground floor slabs expected to be completed in late 2026 before the first sections of the buildings begin to rise above ground.

[smartcode_project_cta:default project_id=426]

Elevated amenity anchors daily life at Aeris, Melrose Park

Repeat buyers are one of the strongest measures of confidence in any apartment development.

At <a href="https://www.apartments.com.au/new-apartments/era-newcastle-west-124-126-bull-street-newcastle-west-nsw-2302">ERA</a> in Newcastle West, some purchasers are returning to <a href="https://www.apartments.com.au/developers/gwh">GWH</a> after living at the developer's One Apartments. Their decision to purchase again was driven by the quality of life they found after moving into their first GWH home.

Keith Wilton had spent years living in a house in East Maitland before deciding it was time for a change. Apartment living had always been on his radar, but he was selective about what he wanted.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/FH_1EzB-1vs?si=XScVlP1ERsTDJoME" title="YouTube video player" width="560"></iframe>

"I had some boxes I wanted to tick," he says.

Keith points to the open-plan design, generous outdoor areas and considered inclusions as key reasons One Apartments worked for him.

“One of those things was a nice indoor open plan area, but also I wanted a nice outdoor open area that I could entertain on in summer or Christmases or birthdays,” he says.

He also found value in the smaller details, from integrated appliances to shared resident spaces including the pool, cinema and rooftop areas.

[smartcode_project:default project_id=135096 project_image_fid=356818]

After comparing several developments, he chose One Apartments because of GWH's longstanding local reputation and his own experience working with the developer on a commercial project more than a decade earlier.

"I knew that they were local, that the quality of the build was going to be up there. I'd looked at other apartment complexes around and close by, and I just knew that here was a better decision location wise."

Today, Keith says the move has completely changed how he experiences Newcastle.

"I enjoy living in this location because it's more of a lifestyle change. That Newcastle city living where you can walk to restaurants and bars and even beaches and parks and even shopping across the road."

[smartcode_project:default project_id=135096 project_image_fid=356828]

Beyond the location, he says it's the sense of community that has surprised him most.

"Everyone loves living here because they chose to live here, but everyone looks out for each other. It's a real great community feel here."

For Aimee and Lyle Goodman, the journey started almost by chance.

<iframe allow="accelerometer; autoplay; clipboard-write; encrypted-media; gyroscope; picture-in-picture; web-share" allowfullscreen="" frameborder="0" height="315" referrerpolicy="strict-origin-when-cross-origin" src="https://www.youtube.com/embed/tsioMLcnjas?si=zq-ys3JuWpfa5hFv" title="YouTube video player" width="560"></iframe>

The couple happened to be having coffee in Newcastle when they noticed the site where One Apartments was about to begin construction.

"We were aware GWH was planning a development," Aimee says. "We made one phone call and things moved pretty quickly after that."

As busy business owners, they initially thought apartment living would simply reduce the maintenance that came with larger homes. Instead, it fundamentally changed how they spent time together.

"We actually catch up more as a family now," Aimee says.

"We've had homes with big yards and lots of space, but everyone ended up in different rooms. Here we'll have dinner together, the kids can play, and we spend far more quality time together."

[smartcode_project:default project_id=135096 project_image_fid=356829]

Lyle says their confidence came from GWH's reputation within Newcastle's building industry.

"I know people who've worked across different apartment projects, and whenever GWH came up the feedback was always the same. They're rock solid. They're quality."

That confidence only grew throughout the buying process.

"One of the things that really impressed us with GWH was the whole process, was the communication," Lyle says. "It was consistent, it was regular, there was no problem if we had some weird questions, there was no problems in getting answers."

[smartcode_project:default project_id=135096 project_image_fid=351104]

Aimee says one moment stood out.

"The project actually finished on time. We realised we needed to hurry up and sell our house because everything was happening exactly when they said it would."

The positive experience at One Apartments ultimately gave all three buyers the confidence to purchase again with GWH, this time at ERA.

Their confidence reflects what many buyers are seeking in today's apartment market. Location remains important, but so too does certainty around delivery, quality and long-term liveability.

[smartcode_project:default project_id=135096 project_image_fid=356822]

ERA builds on those foundations with 280 one, two and three-bedroom apartments across two landmark towers in <a href="https://www.apartments.com.au/developments/newcastle-west-nsw-2302">Newcastle West</a>.&nbsp;

Designed by <a href="https://www.apartments.com.au/architects/fk-australia">Fender Katsalidis</a>, the project will include more than 2,000 square metres of resident amenities, including a resort-style pool, gym, sauna, private cinema and rooftop entertaining spaces overlooking the harbour and coastline.&nbsp;

The development is also within walking distance of the Newcastle Interchange, Honeysuckle, Darby Street, the harbour foreshore, restaurants, retail and the city’s beaches, continuing the walkable lifestyle that existing GWH buyers say has transformed how they live.

[smartcode_project:default project_id=135096 project_image_fid=356826]

For Keith, the appeal remains straightforward.

"You feel at home even before you've moved into your home."

For Aimee, the change is measured in time.

“I just felt like I had more time,” she says.

[smartcode_project:default project_id=135096 project_image_fid=351102]

Construction at ERA is now underway, with more than half of the residences already sold and limited two and three-bedroom apartments remaining in the East Tower release. Priced from $980,000 for two-bedroom residences and $1.46 million for three-bedroom residences, buyers can secure an apartment with a 10 per cent deposit, with premium homes offering ocean views from Level 8 and harbour views from Level 10.

ERA is also backed by Resilience Insurance's 10-year Latent Defects Insurance policy, providing protection against structural or waterproofing defects for 10 years after completion. The project is anticipated to be completed in early 2028.

[smartcode_project_cta:default project_id=135096]

From ONE to ERA: Why buyers are choosing GWH again in Newcastle West

Interest Only

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Westpac will provide interest refunds to 13,000 owner-occupier borrowers who have interest-only home loans.
 The refunds amount to $11 million for 9,400 of those customers. The remediation follows an error in Westpac's systems which meant that these interest-only home loans were not automatically switched to principal and interest repayments at the end of the contracted interest-only period. To remediate the affected customers, Westpac will now:
<ul>
<li>Refund the additional interest paid from when the loan was contracted to convert to principal and interest repayments</li>
<li>Discount the interest rate for the remaining term of the loan.</li>
</ul>
This remediation has been designed so that customers pay no more interest over the life of the loan than they would have if the system error had not occurred. ASIC will monitor Westpac's remediation. ASIC and Westpac are yet to conclude an appropriate remediation program for investor customers with interest-only loans affected by the same system error. This has been a long-standing error between 1993 and August 2016.
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j.ballantyne1990-6AQqhLzZaK

Westpac yet to deal with IO investor refunds after systems error

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APRA announced at the end of March that lenders should limit new interest-only residential borrowing to 30% of new loans. 
The impact of their announcement was "notable and immediate", with the share of new lending declining to just 23% by the September 2017 quarter.
Based on preliminary figures, a similar result is expected by APRA in the December quarter. 
<img src="https://3.bp.blogspot.com/-tfDFORVRndk/WhPs6R-5H3I/AAAAAAAAnG4/0DunnXF1BvUhs5S9fQK0JQeQWC8LJGq1QCLcBGAs/s640/A1.jpg" width="640" height="386" data-original-height="832" data-original-width="1373">
Many borrowers have also been encouraged to switch to principal and interest repayment too, resulting in interest-only loan balances outstanding plummeting by 7% in the past six months. Lenders are also growing their investment loans books well below APRA's arbitrary cap. It remains to be seen whether they begin to start pushing housing lending harder again in 2018. My guess is that they will.  
Stress in the west
Non-performing housing loans remain relatively low at ~0.75%, if a little higher than APRA would ideally like to see. 
The steady increase since 2014 was driven by weakness in the Western Australian economy.
<img src="https://1.bp.blogspot.com/-jFnuh4m5PsI/WhPs6eZg7nI/AAAAAAAAnG8/qRE_2Ru3ntQDWzutUEUHzdJka6W6G7v3wCLcBGAs/s640/A2.jpg" width="640" height="398" data-original-height="834" data-original-width="1338">
Next on APRA's hit list will be a review of loans with a low "net income surplus" and tighter scrutiny of estimated household living expenses. 
APRA also aims to tackle a blind spot whereby lenders are not always clear about other debt held by prospective borrowers. 
More detailed analysis for institutional investors can be found in our monthly subscription reports.
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pwargent-M4siyDbqQY

The switch away from interest only loans: Pete Wargent 

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A third of customers with interest-only home loans may not properly understand the product and could end up in stress once they start paying back the principal, according to investment bank UBS.
Typically, a borrower has to pay only the interest component of a loan when he takes out an interest-only loan for the first five years. After that, monthly payments go up as the borrower also starts paying back the principal.
The new analysis by UBS concluded that borrowers would be exposed to financial stress once their monthly payment jumps. 
The findings are based on a survey the bank conducted between July 7 and August 4 this year seeking responses from borrowers who took out a home loan within the previous 12 months.
UBS found only 23.9 per cent of 907 respondents had an interest-only loan, compared with economy-wide figures that show 35.3 per cent of loans are interest-only, Fairfax Media reported.
Lead analyst Jonathan Mott noted that he initially suspected the survey sample had an error, but now believed a "more plausible" reason was that interest-only customers did not properly understand their loan.
We are concerned that it is likely that approximately one third of borrowers who have taken out an interest-only mortgage have little understanding of the product or that their repayments will jump by between 30 and 60 per cent at the end of the interest-only period (depending on the residual term)," he was quoted by Fairfax Media as saying.
UBS quoted surveys by ME Bank to show many Australians have an apparent lack of financial literacy and understanding of home loan products, with 38 per cent admitting they had "no understanding of interest-only repayments".
He also cited a 2014 Standard &amp; Poor's report that said 64 per cent of Australian adults were financially literate, implying 36 per cent were not.
The survey follows another one by UBS which revealed that there were $500 billion of “liar loans”, meaning they were written based on inaccurate information provided by borrowers in their application.
UBS said that over 70 per cent of survey respondents that took out an interest-only loan said they were "under moderate to high levels of financial stress".
"While these loans are well secured, we believe many borrowers may face substantial stress as interest rates rise or when they revert to principal and interest," UBS wrote.
UBS pointed out that mortgage misselling and irresponsible lending could have contributed to the problem.
The survey also suggested that borrowers would cut their spending (50 per cent) or begin paying down principal (24 per cent), once the higher payments start.
It also noted that the moves by the banks to increase interest rates on interest-only mortgages provided a "substantial" boost to their margins.
Interest-only loan rates have increased by an average of 74 basis points for investors, to 6.26 per cent and 49 basis points for owner occupied borrowers over the last 12 months to 5.78 per cent.
It comes as banks have responded to regulators asking to restrict interest-only loans to 30 percent as the property sector is increasingly being seen as a risk to the economy.
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jonathanchancellor-7SQnKwU6yx

One in three interest-only borrowers don't understand their loans: UBS

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Interest-only lending from Australian authorised deposit-taking institutions (ADIs) fell sharply in the June quarter.
“In flow terms, interest-only lending slowed to 30% of total new loans in the June quarter, down from 36% in Q1,” Tom Kennedy, economist at JP Morgan noted. 
“As a result, the stock of interest-only lending contracted for the first time since 2009, with aggregate interest-only lending values slumping by $2.3 billion.” 
<div class="display-media image primary center">
<a class="cboxElement" href="https://edge.alluremedia.com.au/uploads/businessinsider/2017/08/IO-flow-apra-Q2-2017.jpg" rel="modal"><img class="size_primary" src="https://edge.alluremedia.com.au/uploads/businessinsider/2017/08/IO-flow-apra-Q2-2017.jpg" alt=""></a>Source: JP Morgan
</div>
Along with a slowdown in new interest-only lending and the outright decline in the total value of interest-only loans, Kennedy said that there was also evidence banks are becoming more selective in their loan criteria, particularly in regard to high loan-to-valuation (LVR) lending. 
<div id="taboola-mid-article-stream-thumbnails" class=" trc_related_container trc_spotlight_widget">“The share of loans with an LVR higher than 90% has fallen further to 6.9% of total loans, while the share of lending to borrowers with deposits of more than 20% continues to increase,” he says.</div>
The number of housing loans by banks whose exposure to the residential market is more than $1 billion was up 3.2 percent in the June quarter compared with a year ago, according to the prudential regulator’s latest statistics.
The Australian Prudential Regulation Authority’s Quarterly Authorised Deposit-taking Institution (ADI) Property Exposures for the June 2017 quarter showed the number of housing loans for ADIs with greater than $1 billion in housing loans grew to more than 5.8 million compared with 5.6 million in the June 2016 quarter.
<a href="https://www.propertyobserver.com.au/images/2017/08/29/APRA-Resi.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/29/APRA-Resi.png" alt="">
The new housing loans approved in the quarter edged up slightly at $98.7 billion from $98.4 billion in the year-ago quarter.
Similarly, the average balance of housing loans also rose to $262,200 from $252,100, a rise of 4 percent for the comparable period.
<a href="https://www.propertyobserver.com.au/images/2017/08/29/APRA-CommProps.png" target="_blank">Click to enlarge</a>
<img src="https://www.urban.com.au/images/2017/08/29/APRA-CommProps.png" alt="">
 
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Interest only loans in decline: APRA quarterly stats

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Westpac said it had cut the proportion of interest-only loans to 44 per cent in the third quarter from 52 per cent in the second quarter, and was on track to meet the regulatory requirements for interest-only lending.
It said interest-only lending now represents 36 per cent of new loans, down from 47 per cent last quarter.
The prudential regulator, APRA, has asked banks to cap interest-only at 30 per cent by September to cool off investor borrowing and increased the risk of a hard landing in the  property markets in Sydney and Melbourne.
It is "on track to have flow of interest-only lending below 30 per cent in [the] September quarter 2017," Westpac said.
Of the major banks, Westpac has the largest proportion of loans made on interest-only terms, reflecting a book weighted towards property investors who use interest-only loans to take advantage of negative gearing tax benefits, according to The Australian Financial Review.
Analysts expect the bank’s earnings will be hit harder than rivals from the shift to owner-occupier lending.
The pullback comes as Westpac told mortgage brokers it is responding to APRA's "refining" of the criteria used to assess a borrower's suitability to service loans, by changing the way it calculates loans and assesses borrowers' rental interest deductions.
Just last month, the nation's second largest lender, told mortgage brokers to grill clients on why they want an interest-only loan.
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Its investor lending growth is 5.9 per cent. The APRA cap is 10 per cent.
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Westpac also addressed shadow banking in its update, saying the level of its mortgage warehouse facilities - which are provided to 20 originators, both banks and non-banks - have been steady at $10 billion, with $3.8 billion still able to be drawn.
APRA has asked banks not to allow their warehouse facilities to grow at a faster rate than their own lending books.
Westpac said it is closely monitoring such facilities. "This includes understanding the institution's origination and servicing standards, mortgage portfolio parameters and eligibility criteria against both Westpac's and the institution's credit policies, as well as securitisation rating guidelines," it said.
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Westpac on track to stem interest-only loans growth to 30 percent

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Non-bank lender Homeloans has introduced stricter measures using loan-to-income (LTI) ratios when determining credit decisions for interest-only home loan applications. 
Effective from last Saturday (8 July), interest-only applications are now either declined or referred depending on the income structure of clients with an LTI ratio of greater than eight.
LTI is calculated as the ratio of the total limit of the loan applied for against the client’s total gross annual income.
“Homeloans has access to multiple funding sources, and the use of the LTI in assisting with credit decisions is now a requirement of one of these funding sources.
"It should be noted that the use of an LTI will initially be limited to the assessment of loans where the borrower has elected for interest-only repayments, and will only apply to our Ultra Plus product range,” Homeloans said. 
Brokers can complete a manual calculation to determine what the LTI is for each client and are urged not to proceed with the application if the LTI is below the threshold of eight (unless the loan amount or gross annual income changes).
The Homeloans Ultra Plus Serviceability Calculator has been updated to reflect these new criteria. 
“We're committed to lending responsibly, and ensuring our customers can meet their home loan repayments today and into the future,” the lender wrote in a note to brokers.
“Regulatory bodies have raised concerns about Australia's household debt-to-income ratio, which has risen significantly over the past decade. 
“With this in mind, we're making changes to our home lending credit policy to better assess a customer's ability to service their home loan, and to assist Homeloans’ monitoring of risk settings.”
Australian Broker also advised Advantedge Financial Services will increase the interest rate on all new and existing variable rate interest only home loans by 0.35% p.a., effective Tuesday 8 August 2017. The interest rate on all new fixed rate interest only home loans will increase by 0.35% p.a. These changes apply to both owner occupier and residential investor home loans, across all of Advantedge’s white label partners.
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Homeloans tightens interest only home loan applications

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Interest-only home loans could be "Australia's sub-prime”, an institutional investment fund has warned in spite of the recent steps by regulators such as the APRA to tighten lending criteria by banks.
Mortgage loans to young families, professionals and other over-extended borrowers that are to more than six times their household incomes could wipe out 20 percent of the major banks' equity base, according to an article in The Australian Financial Review based on institutional investment fund JCP Investment Partners’ study. 
Official estimates of average household indebtedness are depressed by the sizeable number of mortgages that are effectively full paid off, says the study.
The Melbourne-based fund said Irish-style housing losses for the bigger-than-recognised pool of riskier borrowers could wipe out half of the banks' equity capital.
Further, it warned that interest-only loans could become "Australia's sub-prime”, in a reference to the US sub-prime mortgage crisis that sparked the global financial crisis in 2008-09.
As regulators crack down on interest-only lending and the budget decision to introduce a tax on banks that will total $6.2 annually drives up the cost of loans, "only time will tell if such households can afford the mortgages they have”, the note said.
Recently, Reserve Bank of Australia Governor Philip Lowe echoed a similar sentiment, saying rising household debt had made the economy more vulnerable, and that it was unclear how stretched consumers might behave in a crisis.
It also follows a review by Australian Prudential Regulation Authority chairman Wayne Byres of bank capital requirements for housing exposures. APRA has clamped down on interest-only loans in a bid to cool the hot east coast property market.
It said interest-only loans must be restricted to 30 per cent of new residential mortgage loans. Interest-only lending represents nearly 40 percent of the stock of residential mortgage lending by banks.
Among the biggest concerns is the impact of households not being able to service their loans, for instance, as borrowing costs are reset higher or those with interest only mortgages are forced to repay the principal as well.
That creates a negative feedback loop – experienced by Ireland after the financial crisis – in which stressed borrowers slash their spending, in turn crunching the economy, driving up unemployment and adding to downward pressure on house prices.
"The long virtuous housing wealth cycle could easily transition to a viscous cycle," said JCP. "Smaller mortgages to deleveraging, flat to decreasing house prices and exuberant to melancholic animal spirits will likely expose much bad lending behaviour."
About half of all the nation's mortgage debt was in the hands of borrowers whose debt was more than four times larger than their gross income, said senior researchers Matthew Wilson and Craig Shephard.
The same borrowers had paid off less than half of their loans, the team found, based on data from several official and private sector sources that adjusted for changes in incomes and the collateral values of their homes.
The average loan-to-income ratio of these heavily indebted households was 6.4, or more than double the old banking "rule of thumb" that mortgage managers didn't lend more than three times a household's income "unless they were doctors".
Regulators might be taking false comfort from the large number of mortgages that were effectively fully paid off, as those households were flattering conventional system-wide measures of household indebtedness.
JCP has identified three classes of borrowers who posed the most risk to the system: professionals on high incomes who had borrowed big, young "pretenders" who had stretched themselves to get into property, and young families burdened with rising living costs.
Almost a third of the most highly geared borrowers were professionals with pre-tax incomes of more than $250,000. While they accounted for just 2 percent of total households, they held 17 per cent of mortgage debt, and an average mortgage worth $1.6 million. Half of these borrowers had an investment property loan.
Other young households – dubbed "pretenders" because they had taken on large debts relative to their incomes – were also at risk. This group tended to have average incomes of $110,000 but an average mortgage that was an "eye-watering" 7.4 times larger at $840,000.
The last group, young families, were slightly better placed with average incomes of $80,000 and average mortgages of $420,000.
While they are a small part of the loan book, their household stress could be high because there were "question marks surrounding treatment of expenses in home loan applications, and generally high costs of living,” it said.
"The old LTI ratio [of three times income] has left the banking lexicon exposing a risk that we may have over-capitalised incomes and hence over-extended credit into certain cohorts."
JCP estimated that 50 percent of the equity of Australian banks would be wiped out by soured loans to these high-risk borrowers.
Using less extreme loss assumptions, the banks could have 20 percent of equity wiped out, it said.
JCP used Ireland as a comparison because it experienced a sharp housing correction in 2008 because it was caught in the middle of the Anglo Saxon system of easy credit provision and the Roman system of strong creditor's rights.
In the more conservative scenario, JCP assumed that a 7.5 percent probability of a default and a 40 percent loss would result in the banks losing $24.2 billion on these loans to the high-risk cohort and $28.2 billion in total. That equated to about 17 percent of the $161 billion equity capital base of the banks.
Australians have continued to borrow at an alarming rate as owner-occupied loans grew at a 6 percent annual compounded growth rate, while investor loans grew by 8 percent.
Interest-only loans have increased from 30 per cent of all mortgage credit to 42 percent.
The fund identified several potential catalysts, including the corporate watchdog's legal action against Westpac over responsible lending.
That might prove to "the seemingly small shock" that forced lenders to request more information. That, in turn, could reduce the borrowing capacity of future buyers.
Another catalyst could be further the steps taken by concerned regulators to reign in a dangerous build up in household debt.
"Credit fuels a bubble, and its ultimate rationing and eventual withdrawal deflates it."
JCP's research adds to concerns of regulators such as APRA's Byres, Australian Securities and Investments Commission chairman Greg Medcraft and Dr Lowe.
The 18-year-old Melbourne-based investment company manages money for large institutions and is one of three Australian equities managers appointed by the Future Fund.
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High-risk interest-only loans could be Australia's 'sub-prime', warns institutional fund

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The Commonwealth Bank has followed moves by ANZ and Westpac to tighten its policies on interest-only home loans.
Interest-only customers who want to refinance their loan with CBA will no longer be entitled to a $1,250 rebate.
Customers who want to take out interest-only loans will also need to hold a 20 per cent deposit, an increase of 5 per cent for owner-occupiers and 10 per cent for investors. 
The changes only applies to new customers and would reduce incentives for interest only borrowing.
The decision from CBA follows Westpac and ANZ Bank who earlier this week announced changes to its lending policy.
Westpac will no longer accept interest-only applications from owner-occupiers with a deposit smaller than 10 percent, up five percent.
They raised their interest-only fixed-rates for owner occupiers and investors at the end of April. So too did CBA.
ANZ Bank now demand a 20 percent deposit for home loans.
The changes are part of new regulations to attempt to cool the demand in the housing market and reduce interest-only lending.
The rules require the banks to limit their interest-only loan book to 30 per cent of total lending.
Currently the country's major banks lend close to 40 per cent of all loans on an interest-only basis.
 
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CBA tighten policies on interest-only home loans

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The Australian Prudential Regulation Authority (APRA) has clamped down on interest-only loans in a bid to cool the hot east coast property market.
The regulator said it had written to all lenders today.
From now on interest-only loans must be restricted to 30 per cent of new residential mortgage loans.
Interest-only lending represents nearly 40 per cent of the stock of residential mortgage lending by banks.
APRA said this was "quite high" by international and historical standards.
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“APRA views a higher proportion of interest-only lending in the current environment to be indicative of a higher risk profile," APRA Chairman Wayne Byres said.
"We will therefore be monitoring the share of interest-only lending within total new mortgage lending for each ADI, and will consider the need to impose additional requirements on an ADI when the proportion of new lending on interest-only terms exceeds 30 per cent of total new mortgage lending," Wayne Byres said.
He said that APRA also continues to monitor the prevalence of higher risk mortgage lending more generally, including lending at high loan-to-income ratios, lending at a high loan-to-valuation ratios, and lending at very long terms or with long interest only periods (e.g. beyond 5 years). 
He said the regulator believes the 10 per cent benchmark for growth in lending to investors continues to provide an appropriate constraint in the current environment, balancing the need to continue to moderate new investor lending with the increasing supply of newly completed construction which must be absorbed in the year ahead.
The new measures:
<ul>
<li>Limit the flow of new interest-only lending to 30% of total new residential mortgage lending, and within that place strict internal limits on the volume of interest-only lending at loan-to-value ratios (LVRs) above 80% and ensure there is strong scrutiny and justification of any instances of interest-only lending at an LVR above 90% </li>
<li>Manage lending to investors in such a manner so as to comfortably remain below the previously advised benchmark of 10%</li>
<li>Review and ensure that serviceability metrics, including interest rate and net income buffers, are set at appropriate levels for current conditions</li>
<li>Continue to restrain lending growth in higher risk segments of the portfolio (e.g. high loan-to-income loans, high LVR loans, and loans for very long terms).</li>
</ul>
No reduction in the 10% annual cap on investor credit growth was announced.
The increased scrutiny comes in response to an environment of heightened risks such as high housing prices, high household debt, low income growth, historically low interest rates, and strong competitive pressures. 
The regulator has has advised ADIs that it is also monitoring the growth in warehouse facilities provided by ADIs to other lenders. These facilities allow lenders to build a portfolio of loans that will eventually be securitised.
“APRA would be concerned if these warehouse facilities were growing at a materially faster rate than an ADI’s own housing loan portfolio, or if lending standards for loans held within warehouses are of a materially lower quality than would be consistent with industry-wide sound practices,” Byres said in the letter.
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jchancellor-FAypfDUnLy

APRA tightens interest only lending rules

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Westpac is reducing the maximum allowable interest-only term for investment property loans to 10 years.
The interest-only term could previously be extended to 15 years, according to brokers. 
In addition, the 12-year fixed rate investment property loan and its low documentation equivalent will no longer be available.
In August last year Westpac tightened its credit policies for interest-only mortgages, given it was an emerging area where financial regulators have raised concerns about bank underwriting standards.
The country's biggest lender to landlords told brokers of changes in August last year requiring new interest-only borrowers to be tested against their ability to make principal, and interest and fees payments over the "residual" period of the loan after the interest-only period had ended.
In May last year the Australian Prudential Regulation Authority chairman Wayne Byres singled out interest-only as a concerning issue.
He said that if a borrower sought a 30-year loan with a five-year interest-free period, only a minority of banks assessed the borrower's ability to make principal and interest payments over the remaining 25 years.
This was the approach Westpac was adopting.
Instead, Mr Byres said that "despite the contractual terms", most lenders assumed the borrower would make principal and interest payments over the full term of the loan.
This assumption allowed banks to "inflate the hypothetical borrower's apparent surplus income by, in our particular example, around 5 per cent", Mr Byres said.
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