Investor home loan growth inching closer to 10% cap

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Investor home loan growth is inching closer to the 10% cap set by the Australian Prudential Regulation Authority (APRA), meaning the banks may soon need to rein in their investor loaning or APRA might be forced to sanction them, economists warn.

The value of home loan approvals rose 1.5% to $39.91bn in January, according to seasonally adjusted figures from the Australian Bureau of Statistics (ABS). This rise was driven entirely by the value of investor loans increasing 4.2% in the month, as loans for owner-occupied housing fell 0.2%.

Economists from Australia and New Zealand Banking Group (ANZ) said growth in investor borrowing was a key concern for the Reserve Bank and APRA.

APRA has made it clear it wants banks to limit growth in loans to investors to 10%.

“At least for the time being, the benchmarks that we communicated – including the 10 per cent benchmark for annual growth in investor lending – remain in place and lenders that choose to operate beyond these benchmarks are under no illusions that supervisory intervention is a possible consequence,” Wayne Byres, ARPA chairman, told the A50 Australian Economic Forum in Sydney in February.

As noted by Matthew Hassan, senior economist at Westpac, with investor loan growth running at 6.6% in the year to January, banks or the APRA might soon need to take further action.

“Lenders will either have to start reining in growth in investor loan approvals back to a sub-10 per cent annual pace in coming months or run the risk of sanctions from the regulator,” he said.

Related stories:
Strong Property Investor Loan Growth Is Worrying Banking Regulators
Forecast: The Official Cash Rate Will Fall To 1% This Year


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