APRA to keep caps on lenders' loan activity until household debts levels stablise

APRA to keep caps on lenders' loan activity until household debts levels stablise
APRA to keep caps on lenders' loan activity until household debts levels stablise

The Australian Prudential Regulation Authority will keep its caps on lenders' loan activity until household debt levels stabilise.

The prudential regulator made their policy affirmation in an address to building societies and credit unions on Monday by APRA's boss Wayne Byres.

Byers said lending restrictions in interest-only and investor loans were working.

He said they will stay until APRA sees household debt levels stabilise and lending standards increase.  

The crackdown began in late 2014. 

"For those of you who chafe at the constraint, their removal will require us to be comfortable that the industry's serviceability standards have been sufficiently improved and – crucially – will be sustained," Mr Byers said in a presentation to the Customer Owned Banking Convention conference in Brisbane.

"We will also want to see that borrower debt-to-income levels are being appropriately constrained in anticipation of, eventually, rising interest rates."

APRA's lending restrictions hold growth in investor loans within banks to be no higher than 10 per cent.
 
Interest-only property loans must be restricted to 30 per cent of all new residential loans.
 
It has resulted in interest-only loans declining from around 40 per cent of all new mortgages to around 15 per cent.
 
Mr Byres said he expected that in a period of high house prices, low interest rates, weak income growth and rising household debt levels, bankers would respond by tightening lending standards, which had "absent regulatory intervention, been drifting the other way".

Byres said lenders had favoured increased market share over prudence.  

"That temptation has, unfortunately, been widespread and not limited to a few isolated institutions – the competitive market pushes towards the lowest common denominator."

 
Tags: 
APRA Lending

Comments

Be the first one to comment on this article
What would you like to say about this project?