APRA eyes mortgage reclassifications

by Julia Corderoy15 Mar 2016

The widespread reclassification of mortgages from investment to owner-occupier loans has caught the attention of banking regulator, APRA.

In a letter to all Australian Deposit-taking Institutions (ADIs), APRA has warned the banks to be consistent and accurate.

“A number of ADIs have recently reported significant changes in housing loan purpose between investment and owner-occupied.

“These data are used in public policy decisions, prudential supervision and statistical publications. Where the change in loan purpose is not reported correctly (i.e. from the period that the change occurred), APRA, the Reserve Bank of Australia (RBA) and the Australian Bureau of Statistics (ABS) are impeded in accurately ascertaining the underlying movements in housing loans.

“Reporting of fixed term housing loans must reflect the current purpose of the loan because the split by housing loan purpose is important for monetary policy and financial stability considerations.”

According to an ABC report, in the past six months more than $35 billion worth of investor loans have been reclassified to owner-occupier, including another $1.4 billion in January.

In a recent research note, also published by the ABC, UBS bank analyst Jonathan Mott said there was growing scepticism about banks giving the “real story” about housing credit.

“While it is understandable some existing customers are reclassifying themselves to avoid higher interest charges as their circumstances have changed, there is increasing evidence new customers may be stating their loan is for an owner-occupied property to circumvent the additional imposts on investor borrowing,” Mott said.