REPEAT:Australia APRA Raises Possibility of Macro-Pru Pullback

Repeats Story Initially Transmitted at 00:04 GMT Oct 23/20:04 EST Oct 22

     SYDNEY (MNI) - The Australian housing lending and borrowing conditions are

developing to the point where the prudential regulator would be ready to

consider pulling back some of the macro-prudential measures enacted earlier in

the year, Australian Prudential Regulation Authority chairman Wayne Byres said

Monday.

     Byres made the comments in a speech at a banking convention in Brisbane.

     For that to happen, APRA wants to feel comfortable that the industry's loan

serviceability standards have improved sufficiently and will be sustained, and

that the household debt-to-income levels remain appropriate in preparation for

the eventual rise in interest rates, he added.

     "We would ideally like to start to step back from the degree of

intervention we are exercising today," Byres said, reminding that the

quantitative benchmarks were always intended as temporary measures. 

     "That remains our intent, but 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," he said. "We will also want to see that borrower debt-to-income

levels are being appropriately constrained in anticipation of (eventually)

rising interest rates."

     Bryes said the industry is moving in the right direction to make that

happen as lending institutions are improving serviceability standards and policy

overrides are being monitored more thoroughly and consistently. "Put simply, the

quality of lending has improved and risk standards have strengthened," he said.

     APRA is currently reviewing the serviceability standards of small

authorized lending institutions, which will help inform its judgement as to how

close they are to easing the benchmarks.

     Earlier this year, APRA announced measures to reinforce sound mortgage

lending practices, including strict limits on interest-only loans, while

maintaining the existing 10% benchmark for growth in lending to investors.

     APRA asked banks to manage lending to investors in such a manner so as to

comfortably remain below the 10% benchmark that has been in place since 2015.

     The new measures mainly focused on interest-only mortgage, with APRA

advising banks they must limit them to 30% of total new mortgage lending. Within

that boundary, banks were asked to ensure strict internal limits on the volume

of interest-only lending that have loan-to-value ratios (LVR) above 80%.

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