The head of the Australian Prudential Regulation Authority has not ruled out taking more action to slow down the current level of lending to investors.
In a speech to the Australian Business Economists Lunchtime Briefing in Sydney yesterday, APRA chairman Wayne Byres said the regulator was waiting to see what affects policy changes instituted by lenders were having before taking any more action.
“Given many changes to lenders’ policies, practices and pricing are still relatively recent, it is too early to say whether further action might be needed to preserve the resilience of the banking system,” Byers said.
“We remain open to taking additional steps if needed, but from my perspective the best outcome will be if lenders themselves maintain a healthy dose of common sense in their lending practices, and reduce the need for APRA to do more,” he said.
Byers said actions taken by APRA, such as mandating that investor lending should not grow at more than 10% per annum, were necessary to protect Australia’s banking and housing sectors from practices that led to the global financial crisis.
“As we know, housing lending was at the centre of the global financial crisis.
“Those extremely poor practices – and the misallocation of credit that resulted – didn’t make it to these shores. But in a banking system such as Australia’s, there’s no room for complacency: the quality of lending for housing is too important not to be subject to a great deal of scrutiny.”
While those poor practice may not be occurring in Australia, Byers said there was evidence to suggest that lender providing finance for housing were operating in an environment of increased risk as underwriting standards have softened.
To the credit of lenders, Byer’s said there are signs they are working towards meeting the 10% growth limit and stressed the regulator was not trying to hand-brake lenders and investors.
“The growth in investor lending remains marginally above the 10 per cent benchmark, and may well be so for the next few months. However, there has been a moderation in the previous strong upward trajectory, and the large lenders have all indicated their intention to work below this benchmark.
“A moderation in lending growth as currently envisaged should therefore not be seen as unduly restrictive: it is not placing a foot on the credit brake, but rather easing off the accelerator.”
Byers also allayed fears the regulator would take specific action to try and slow the growth of property prices in cities such as Sydney and Melbourne.
“Our mandate is to preserve the resilience of the banking system, not to influence prices in particular regions.
“Sound lending standards – prudently estimating borrower income and expenses, and not assuming interest rates will stay low forever – are just as important (and maybe even more so) in an environment where price growth is subdued as they are in markets where prices are rising quickly.”
Can you afford to buy in this suburb? Find out how much you can borrow
Top Suburbs :
st kilda west
Get help with your investment property
Do you need help finding the right loan for your investment?
When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.
Just fill in a few details below and we'll then arrange for a local Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus and appointment is free.
We value your privacy and treat all your information seriously - you can check out