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RBA prepared to intensify investor lending crackdown

RBA prepared to intensify investor lending crackdown

The central bank has warned that efforts to curb investor lending could be fading and is ready to take further action as property investors continue to drive housing credit growth.

In her first speech as assistant governor (financial system) at the Reserve Bank of Australia, Michele Bullock explained how regulators have become more active since the GFC.

Addressing a Bloomberg breakfast event in Sydney yesterday, Ms Bullock said there is no doubt that APRA’s investor lending curbs have addressed some of the risks in the housing market but warned more may be required.


“In 2014, the Australian regulators took the view that risks were building in the residential housing market that warranted attention,” she explained.

“There was very strong demand for residential housing loans, particularly by investors. Price competition in the mortgage market had intensified and discounts on advertised variable rates were common.”

During this time, Ms Bullock said there also appeared to be a relaxation in non-price lending terms.

“The share of new loans that were interest only was drifting up and the growth of lending for investment properties was accelerating. Unsurprisingly in this environment, the growth in housing prices was strong, particularly in Melbourne and Sydney,” she said.

APRA has since tightened a number of aspects in its supervision. In addition to limiting banks’ investor housing lending above a benchmark of 10 per cent, the prudential regulator has set more prescriptive guidelines for serviceability assessments and intensified its scrutiny of lending practices.

ASIC also undertook a review of lending with a focus on whether lenders were complying with responsible lending obligations, Ms Bullock said.

“There is no doubt that the actions have addressed some of the risks,” she said.

“Nevertheless, early experience suggests that while the resilience of both borrowers and lenders has no doubt improved, the initial effects on credit and some other indicators we use to assess risk may fade over time.

“We are continuing to monitor their ongoing effects and are prepared to do more if needed.”

The latest ABS housing finance figures, released last week, show investor lending that was up 4.2 per cent in January to be 27.5 per cent higher over the year.
ANZ Research noted that the recent acceleration in investor activity is sure to keep both the RBA and APRA on high alert, as market sentiment shows no signs of easing.

[Related: APRA mortgage curbs may not be the best answer: Westpac]

RBA prepared to intensify investor lending crackdown


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