APRA announces, it will remove the 10% investor cap restriction

This week, APRA announced that it would be removing its 10 per cent benchmark on investor loan growth for banks as long as they can “provide assurance on the strength of their lending standards”.

For those of you unaware of the 10 per cent benchmark means.  In 2015 APRA, the RBA, ASIC and the ABA put the brakes on property investors.  They did this by tightening lending policy, reducing loan to value ratios and increasing the cost of interest only loans.

APRA also placed heavy restrictions on all Australian Lenders, restricting the year on year growth of their investment lending to not more than 10 per cent on the previous year.

This policy was brought about out of fear for the strength of our property market and whether or not a property crash was looming and what the impact that would have on the Australian economy.

For the 10 per cent benchmark to no longer apply, Australian banks will be 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.

For those banks that do not meet the required commitments, the benchmark will continue to apply.

As the royal commission, over the last few weeks, has largely slammed the lack of oversight, processes and accountability of the banks, it is somewhat surprising that the prudential regulator has effectively said that the banks can self-regulate this control.

I wait with bated breath to see whether the removal of the cap will bring down the rates on interest only loans.

Declan Hanratty  Managing Director

M: 0409 089 456  F: 03 9416 1916  ABN: 19 880 907 430  POSTAL:  PO Box 1551  COLLINGWOOD  Victoria  3066 MFAA Membership No.  50217  Australian Credit Licence No. 383120  Credit Ombudsman Service No. 412201