APRA should take a more 'sophisticated' approach to curb investor lending

by AB31 Jul 2015
The head of a national broker group says APRA should have taken a more “sophisticated” approach to curbing investor lending and keeping growth sustainable.

As investors around the country are hit by widespread rate increases, after APRA warned the banks to keep investment lending growth below 10%, the executive director of Smartline Joe Sirianni says he believes the regulator 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,” he 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?

“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.”

In addition to adopting a more geographically-targeted approach to restrict investor lending, Sirianni says it was wrong of the banks to hit existing investors as well.

“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.”


  • by GC 31/07/2015 9:26:00 AM

    I doubt APRA know what the word "sophisticated" means. They prefer to act like BIG BROTHER and us a sledge hammer approach. I personally cant see where the problem is with property increases as it's really only isolated to Sydney and Melbourne. The one issue that will stop increases is affordability and this happens with all the time. When prices increase to a point where people fee they cant afford it, they stop buying - then incomes catch up of incomes and prices increase again due to affordability. This is just a cycle that has been happening for over 100 years.
    As far as the banks increasing investment loan rates.....just an excuse to make extra profits.

  • by Harold Spencer 1/08/2015 11:12:19 AM

    I am not sure this is done by APRA. APRA states that it wants banks to limit investor lending the banks then do what they think is necessary to abide by APRA's request. The choice to increase rates on loans already set up is done by the lenders APRA didn't release an edict stating raise rates on all investor or IO loans. I think sometime we as broker's can be quick to jump to the wrong conclusion due to the lack of education around the various institutions that have an input around lending in Australia.