The banking regulator is axing a 10 per cent speed limit on bank lending to property investors, saying the cap has served its purpose and improved credit standards. With Sydney house prices falling and credit growth slowing, the Australian Prudential Regulation Authority on Thursday said it would remove the cap for bank boards that could prove they had been following its guidelines on prudent lending. APRA is removing the 10 per cent 'speed limit' on investor loan growth. In late 2014, amid a surge in borrowing by property investors and rapid house price growth, APRA took the rare step of setting a 10 per cent limit on the annual growth in banks' housing investor loan portfolios. The measure has rocked the mortgage market in recent years, prompting banks to jack up interest rates for housing investors, and demand borrowers stump up bigger deposits. But on Thursday, APRA chairman Wayne Byres said it was prepared to remove the measure because there had been an improvement in lending standards and a slowdown in credit growth.
"The temporary benchmark on investor loan growth has served its purpose. Lending growth has moderated, standards have been lifted and oversight has improved," Mr Byres said.
Even so, the regulator will retain a separate 2017 policy that requires banks to limit their new interest-only lending to less than 30 per cent of all new home loan approvals.
APRA also said there was "more to do" in improving other aspects of banks' lending, including how they assessed borrowers' expenses, their existing debts, and the approval of loans that fell outside of banks' formal lending policies.
APRA said it expected banks to introduce limits on the proportion of new lending that could be done at "very high" debt-to-income levels.
"In the current environment, APRA supervisors will continue to closely monitor any changes in lending standards," Mr Byres said.
"The benchmark on interest-only lending will also continue to apply. APRA will consider the need for further changes to its approach as conditions evolve, in consultation with the other members of the Council of Financial Regulators."
26 April 2018