Citi restricts loans to foreign investors in response to regulatory nudge

Citigroup has announced measures targeting overseas investors, including a ban on interest-only loans.

Following recent regulatory guidance, Citigroup has become the first major lender to take the step, according to The Australian Financial Review.

The Australian Prudential Regulatory Authority (APRA) recently announced a 30% cap on interest-only loans as it said the category, which represents nearly 40% of the stock of residential mortgage lending by banks, was "quite high" by international and historical standards. 

The major changes, which were notified to mortgage brokers last week, will be a ban on interest-only loans for:

• All non-resident loans;
• Loans reliant on foreign income;
• Loans requiring Foreign Investment Review Board approval; and,
• Loans solely with owner-occupied security.

"That means, interest-only repayments will only be allowed for resident loans secured by an investment property," Matt Wood, head of mortgages distribution, told mortgage brokers.

Citigroup has only 1% of Australian property market share, but has a high profile across Asia.