APRA should take a more sophisticated approach to investor lending

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As major and non-major lenders around the country lift home loan interest rates in response to the Australian Prudential Regulation Authority’s (APRA) push to slow down investor lending, the head of a mortgage broking firm believes the regulator should have taken a more sophisticated approach.

APRA last week told banks to hold more capital as security against their mortgage books and has consistently told lenders this year to bring investor lending growth under 10%.

As investors around the country are hit by rate increases as a result, Joe Sirianni, director of broking firm Smartline believes APRA should have taken a more targeted approach.

“If you look at it from APRA’s point of view, with prices going up and interest rates at historic lows, you can see why they want to take some heat out of the market, but I would have liked to see a more sophisticated and segmented approach,” Sirianni said.

“When you look at Australia the Sydney metro and Melbourne metro markets are probably overheated, but is that the same in Wollongong or Newcastle or other markets?” he said.

“No matter if it is or isn’t, buyers in those markets and those markets themselves have been hit as a result of APRA’s changes, which is why I’d like to see APRA and the banks use the more sophisticated data we have now to target the areas that are overheated.”

While Sirianni said most of the measures implemented by banks in response to APRA's clampdown, one response was somewhat unexpected.

“I wasn’t surprised when the banks stopped discounting or when they tightened up their LVRs or lifted rates for new loans, but I was a little surprised when they lifted rates for existing customers.

“If you want to slow down investor lending then I don’t think raising rates on existing loans would do that.

“From the bank's point of view they might say it’s as a result of needing to hold more capital, but I’m surprised they would pass that on so quickly.”

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