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.

“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]

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