Powered by MOMENTUM MEDIA
subscribe to our newsletter

Interest-only cap has been met: APRA

In another signal that the prudential regulator could be ready to remove macro-prudential measures, APRA this week confirmed that interest-only benchmarks have done their job.

Speaking at the Senate Economics Legislation Committee in Canberra on Thursday (26 October), APRA chairman Wayne Byres said that the regulator has continued its work to reinforce sound lending standards since it last appeared before the committee in May.

He said: “The measures we’ve taken appear to be having a positive impact with strengthened serviceability assessments, moderating investor loan growth and a reduction in high loan-to-valuation lending, and our most recent benchmark for interest-only lending to remain below 30 per cent of total new lending looks like it has been comfortably achieved overall.”

The admission comes after the APRA chair flagged the possibility that macro-prudential measures — which have been in place since 2015 — could soon be removed.

Mr Byres told the Customer Owned Banking Convention in Brisbane on Monday that since the regulator stepped in to curb certain types of credit, the quality of lending has improved and risk standards have strengthened.

Advertisement
Advertisement

“We would ideally like to start to step back from the degree of intervention we are exercising today,” Mr Byres said.

“Quantitative benchmarks, such as that on investor lending growth, have served a useful purpose but were always intended as temporary measures. That remains our intent, but for those of you who chafe at the constraint, their removal will require us to be comfortable that the industry’s serviceability standards have been sufficiently improved and — crucially — will be sustained.

“We will also want to see that borrower debt-to-income levels are being appropriately constrained in anticipation of (eventually) rising interest rates.”

[Related: APRA eager to wind back lending curbs]

PROMOTED CONTENT


>Speaking at the Senate Economics Legislation Committee in Canberra on Thursday (26 October), APRA chairman Wayne Byres said that the regulator has continued its work to reinforce sound lending standards since it last appeared before the committee in May.

He said: “The measures we’ve taken appear to be having a positive impact with strengthened serviceability assessments, moderating investor loan growth and a reduction in high loan-to-valuation lending, and our most recent benchmark for interest-only lending to remain below 30 per cent of total new lending looks like it has been comfortably achieved overall.”

The admission comes after the APRA chair flagged the possibility that macro-prudential measures — which have been in place since 2015 — could soon be removed.

Mr Byres told the Customer Owned Banking Convention in Brisbane on Monday that since the regulator stepped in to curb certain types of credit, the quality of lending has improved and risk standards have strengthened.

“We would ideally like to start to step back from the degree of intervention we are exercising today,” Mr Byres said.

“Quantitative benchmarks, such as that on investor lending growth, have served a useful purpose but were always intended as temporary measures. That remains our intent, but for those of you who chafe at the constraint, their removal will require us to be comfortable that the industry’s serviceability standards have been sufficiently improved and — crucially — will be sustained.

“We will also want to see that borrower debt-to-income levels are being appropriately constrained in anticipation of (eventually) rising interest rates.”

[Related: APRA eager to wind back lending curbs]

Interest-only cap has been met: APRA
mortgagebusiness

Latest News

The big four bank has admitted to cutting off services to around 40,000 customers in the last two and a half years. ...

The latest index by the non-bank has suggested that home loans are at their most unaffordable for the first time in five years.  ...

The government has established a taskforce to look into bank branch closures in regional communities. ...

Join Australia's most informed brokers

Do you know which lenders are providing brokers and their customers with the best service?

Use this monthly data to make informed decisions about which lenders to use. Simply contribute to the survey and we'll send you the results directly to your inbox - completely free!

Do you think APRA's bank buffer changes will see more borrowers use non-banks?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.