MNI Australia APRA Removes 10% Investor Mortgage Growth Limit

By Sophia Rodrigues

     SYDNEY (MNI) - Australia's financial regulator has removed the 10%

benchmark it had imposed on investor mortgage growth over three years ago in

return from assurance from banks that they will maintain strong lending

standards. 

     In a statement Thursday, Australian Prudential Regulation Authority said

it,"is now prepared to remove the investor growth benchmark, where the board of

an ADI (authorised deposit-taking institution) is able to provide assurance on

the strength of their lending standards."

     Banks are expected to confirm that lending has been below the investor loan

growth benchmark for at least the past six months, lending policies meet APRA's

guidance on serviceability, and lending practices will be strengthened where

necessary.

     The 10% limit on investor mortgage growth was announced in December 2014 in

response to strong growth in lending to property investors. 

     But in recent months, lending to investors dropped significantly below the

10% benchmark as banks strengthened their lending standards and imposed slightly

higher rates for investor mortgages. This resulted in a number of borrowers

changing the purpose of their existing loan from mid-2015 from investor to

owner-occupiers.

     The rate of investor mortgage growth thus fell from a peak of around 10.8%

y/y in mid-2015 to a low of 2.8% y/y in February this year.

     MNI Analysis in October last year discussed the possibility of a pullback

in investor lending growth after APRA chairman Wayne Byres hinted at this in a

speech.

     "So instead of relying on quantitative benchmarks, the APRA now appears

keen to focus more on lending standards and capital requirements because they

might work better in dealing with the risks in the housing market," MNI wrote in

October.

--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com

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