APRA boss defends investment clampdown

by AB10 Aug 2015
APRA has defended recent efforts to slow down lending to investors in front of the federal government inquiry into home ownership.

Speaking at the House of Representatives Standing Committee on Economics Inquiry into Home Ownership, APRA chairman Wayne Byres said the requirement for banks to keep year-on-year investment lending growth below 10%, and to hold more capital against their mortgage books, were “common sense.”

“We have requested banks to take a prudent view of borrower income, ensure they are not underestimating a borrower’s living expenses, and allow for the fact that interest rates will not always be as low as they are today,” Byres said.

“None of this should be seen as anything other than common sense,” he said.

While many have speculated that APRA’s actions have been spurred on by the continual growth of house prices in Sydney and Melbourne, Byres said the regulator was looking at the much bigger picture.

“It is important to note that APRA’s concerns are not driven solely by housing price growth in the major markets of Sydney and Melbourne.

“Our objective has been to ensure that in the broader environment of high house prices, high household debt, historically low interest rates and subdued income growth - along with strong competitive pressures within the financial system - sound lending standards are maintained across the board.”

Byres said while the full effect of the regulators recent move of forcing bank to hold more capital against their mortgage books would not be felt for some time, it would be interesting to see how the move affects the balance between major and non-major lenders.

“Given implementation is still 11 months away, it is too early to assess the impact of this change on the housing loan market.  

“The extent to which those banks are capable of repricing their business in response will provide an interesting insight into the extent to which the largest banks are subject to competitive pressure from the range of other housing lenders present in the market.”
 

COMMENTS

  • by Really? 10/08/2015 9:26:03 AM

    The only Banks to have a system that survives 2007 - the biggest financial crisis the world has seen.
    So the motto is...."if you have a winning system.....er....change it".

  • by simon 10/08/2015 9:26:40 AM

    OMG. Glad I read the terms and conditions of responding before writing this as I believe the gentleman that heads up the less than knowledgeable regulatory body may have his cranium in a position where little light would appear!
    Certainly no Byers remorse (pun intended)
    Seriously,"its implementation is still 11 months away"? Perhaps on planet APRA, but on earth rates have just increased for many existing investors so the pain has already started.
    Another comment "it would be interesting to see" OMG again, your playing with peoples lives and it will be interesting to see? How about doing n impact study beforehand.
    And then "interest rates will not always be as low..." That's right..because you just raised them.
    Focus your attention on overseas investor restrictions, and if you think this isn't a Sydney / Melbourne led issue sack all your advisors or perhaps do the right thing and sack yourself.
    For the avoidance of doubt I think APRA have it wrong and need to be challenged.

  • by John 10/08/2015 9:27:32 AM

    That is fine to defend the clamp down on investment loans? Does he defend price rorting?