The Finance Brokers Association of Australia (FBAA) has criticised the Australian Prudential Regulation Authority (APRA) for clamping down on interest-only loans, saying it will hurt small business.

APRA has announced measures to limit the flow of new interest-only mortgages by banks to 30 per cent.

FBAA executive director Peter White says APRA is pushing home loan borrowers into principal and interest loans and away from interest-only loans, because the latter are generally there for people with a business, investment, or bridging loan need.

“It’s an arbitrary move,” said Mr White.

“APRA has lumped everyone in the same basket, which means small businesses could have restricted access to appropriate styled debt.

“I mentioned this to the Prime Minister at a business lunch two weeks ago and he was understanding of this consideration.”

Mr White says APRA has overstepped the mark without considering the consequences.

“If small business people can’t get access to the right style of debt, it may mean they can’t gear their business to expand, take up new contract opportunities, or maintain current staffing levels.

“It could push more people onto unemployment benefits because small business won’t be able to hire more staff.

“This may mean in the long-term people won’t be able to save as much, and therefore in retirement, will have to rely on the pension.”

Mr White suggests neither of these are good outcomes, especially for governments trying to reduce stress on budgets and expenses.