APRA won’t clamp down further on property investors

Adam Smith 31 August 2016

house lockAustralia’s banking regulator has said it has no intention to further tighten lending to property investors.

Speaking to an event at the Actuaries Institute, Australian Prudential Regulation Authority (APRA) chair Wayne Byres has said the regulator’s investment cap is serving its purpose. In late 2014, APRA announced it would cap growth of banks’ investment loan portfolios at 10%. Byres told the Actuaries Institute that the cap appeared to be serving its purpose, the Australian Financial Review has reported.

Byres pointed out that actual rates of growth for bank investment loan portfolios were around 5%, the AFR said. He poured cold water on speculation that the regulator could further tighten the current investor cap.

“It is all very well to say that 10% cap could be a bit high, and you could lower it by a couple of percentage points, but actual growth in investor lending at present is down near 5%. I could lower the cap to 7%, but I don’t know what difference that really makes,” Byres said.

But Byres did hint that the cap could change in the future, suggesting that APRA could ease its approach, the AFR reported.

“[The cap] was always intended to be temporary. It is still our view that it will be temporary, so we are certainly thinking about the next evolution of what we do,” Byres said.

According to the AFR, Byres also suggested that banks should assess mortgage borrowers’ ability to repay by implementing an interest rate buffer of at least 2%, with a floor of at least 7%.

“The 7% number is a useful mechanism to keep serviceability standards at a certain level and not have those serviceability standards shift with general interest rate movements up and down,” Byres said.

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