APRA Scraps Its 10% Lending Limit

Posted on 26/04/2018  
APRA Scraps Its 10% Lending Limit

The banking regulator is scrapping the 10% speed limit on bank lending to property investors, saying the cap has served its purpose and improved credit standards.

Investors are likely to the big beneficiaries in the home loan market after the Australian Prudential Regulatory Authority (APRA) announced the scrapping of its housing investor loan cap.

In response to a surge in bank lending to property investors, APRA in 2014 imposed a cap on investor lending growth of no more than 10% a year. The intention was to take some of the heat out of the housing markets in Sydney and Melbourne (never mind the rest of Australia).

But on Thursday 26 April, chairman Wayne Byres said APRA 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,” he said. “Lending growth has moderated, standards have been lifted and oversight has improved."

Steve Jovcevski from comparison site Mozo.com.au says the removal of the cap could see further downward pressure on mortgage rates for investors.

“We’re expecting banks, that may have previously shelved their investor loan business to keep within the growth limit, to start actively pursuing investors again with huge interest rate discounts,” says Jovcevski.

“Already, we’ve seen lenders begin to take the knife to investor home loan rates. as well as loosen up lending requirements over the last few months. APRA’s decision is likely to intensify this competition between the banks for a healthy investor loans book. “

He says the result is that the gap between owner occupiers and investor rates, especially for principal and interest borrowers, is likely to get smaller and smaller.”

Mozo found 26 lenders have slashed rates for investors with principal and interest repayments since the start of the year.

The additional 30% cap imposed by APRA on interest-only lending in March 2017 is less likely to be softened in the near future.

 

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