APRA and the Reserve Bank acted in concert yesterday to ease the tight money policies that have dismayed the capital and labour markets these last few years.A wave of bad debts facing Australia's banking sector (and its larger banks above all) now look to be averted. Or minimised, in the bearish view.Impairments from the waterfall of conversions from interest-only to principal and interest loans (a topic much discussed this year) will be deferred as banks test the boundaries of APRA's new stance.A flurry of refinancing must lie ahead.Keeping a lid on things will still occupy APRA, even though its overall shift in policy is that, from January 2019, "it will remove its supervisory benchmark on interest-only residential mortgage lending by authorised deposit-taking institutions."Internal limits should cover both the level of new interest-only lending and the type, including lending on an interest-only basis to owner-occupiers and lending on an interest-only basis at high LVRs, APRA cautioned.The benchmark on IO lending, APR said, "was put in place as a temporary measure in March 2017, as part of a range of actions over recent years to reinforce sound lending practices. "The introduction of the benchmark has led to a marked reduction in the proportion of new interest-only lending, which is now significantly below the 30 per cent threshold." Earlier this year, APRA announced its intention to remove the supervisory benchmark on investor loan growth subject to ADIs providing certain assurances as to the strength of their lending standards. Most ADIs have now provided those assurances.  In canned comments, APRA Chairman Wayne Byres said: "APRA's lending benchmarks on investor and interest-only lending were always intended to be temporary. Both have now served their purpose of moderating higher risk lending and supporting a gradual strengthening of lending standards across the industry over a number of years." Notwithstanding the removal of the interest-only benchmark, Byres said, "ADIs still need to ensure they maintain adequate oversight of the level and type of interest-only lending."With credit growth in the doldrums recently, lenders have pared back their much attacked level of interest rates on the interest only loans they could fund. On RateCity data, for investors IO rates are down to 4.84 per cent from 5.02 per cent six months ago. Rates for owner occupiers, on a principal and interest loan, RateCity put at around 4.27 per cent today as an average.This is unchanged.