APRA tightening not slowing investor loans

by Julia Corderoy01 Jul 2015
APRA’s recent tightening of investor lending has been fruitless, as loans to investors showed no signs of slowing in May.

According to the latest monthly banking statistics released by APRA, loans to households for housing investment increased by $4.64 billion in May, despite lenders announcing restrictions on loans to investors.

In fact, loans to investors increased by more in May with the lender restrictions, compared to April. According to the APRA statistics, loans to investors increased by $4.57 billion over April.      

Over the year to May, loans to housing investors grew by 11.2%, outgrowing APRA’s benchmark of 10%. 

The crackdown on investor lending has received mixed responses since major and non-major lenders announced varying restrictions over May. According to ratings agency, Moody’s, the absence of any restrictions would have increased the proportion of investment and interest-only loans, which would lead to a weakening of the bank portfolios’ quality.

However, Aussie founder and chairman, John Symond worries APRA’s crackdown on investor loans could have unintended consequences by favouring foreign investors.

“I am just worried that there is going to be unintended consequences here because you might find these foreign investors have even a bigger go because regular Australians are going to find it tougher to get through the hoops to be able to borrow money to buy an investment property, in most cases their future nest egg,” he told Ross Greenwood on the 2GB Money News program last month.
Meanwhile, NAB's head of retail banking, Gavin Slater said restricting growth in investor lending won’t significantly slow booming house prices in Sydney or Melbourne. 

However, it may take some time for lending restrictions to properly flow through to the market. In addition, new Basel 4 banking regulations will require banks to hold more capital against money loaned out, so it is still likely the market will see a reduction in investor lending in the coming months.


  • by SEQ Broker 15/07/2015 10:20:13 AM

    Fair Dinkum APRA. A blind man riding by on a horse can tell you that these measures wont work for Sydney and Melbourne. You just make it more difficult for battlers who are trying to get ahead and pose no penalty on the wealthy because they are doing 80% LVR mortgages simply to avoid LMI. Fools.

  • by Dino 15/07/2015 11:51:25 AM

    It's a double whammy....there is less and less liquidity in the global bond market. There is another liquidity panic coming and when it comes lenders will make credit conditions tighter. The market will do the work... Not some government academic hack who doesn't understand how markets work. Housing downturn here we come!