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APRA Ends Interest-Only Cap, Big Banks Rise

The Commonwealth Bank of Australia (ASX: CBA) share price is up 0.64% after APRA decided to end the interest-only cap.

Australian Prudential Regulation Authority (APRA) is the regulator of Australian banks and had previously implemented a 30% cap for banks as to how much of their loans could be interest-only.

APRA ends interest-only cap

APRA has ended the 30% interest-only cap and it has also stopped the 10% growth cap on investor lending.

According to the regulator both of the measures have “served their purpose” considering house prices in the key cities of Melbourne and Sydney are falling by around 1% a month.

Most banks have given APRA assurances that the stronger lending standards will be maintained. We’ll have to see if that is adhered to.

The Australian Financial Review quoted Treasurer Josh Frydenberg saying of the interest-only benchmark it: “was always intended by APRA to be temporary in nature and APRA has determined that it has now served its purpose.”

Are the banks now buys?

I think it’s too early to call that banks are going to turn around yet. Westpac Banking Corp (ASX: WBC) shares are down slightly at the moment and some analyst predictions may be too optimistic.

At this stage it could be better to stick to shares that aren’t under such public scrutiny with proven growth records such as the ones in the below free report.

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