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Former APRA curbs still a ‘strain’ on credit growth

The prudential regulator’s former curbs on interest-only lending will continue to serve as a “drag” on housing credit growth, despite being scrapped over a year ago, according to ANZ Research.

In a new analysis, ANZ Research has claimed that the Australian Prudential Regulation Authority’s (APRA) 30 per cent speed limit on interest-only lending growth in 2017 would continue to weigh on credit growth in the first half of 2020, despite being removed in December 2018.

The research group noted the continued lag in housing credit growth, as reported by the Reserve Bank of Australia (RBA) in its Financial Aggregates data.

The latest data revealed that housing credit growth slowed to 2.9 per cent in the year to November 2019, down from 4.9 per cent in the previous corresponding period.

The slump in housing credit growth over the year to November 2019 marks the slowest rate of growth on record.  


The credit data reflects the total stock of debt, with ANZ Research observing – along with AMP Capital chief economist Shane Oliver – that new housing finance commitments are offset by the paydown of existing debt.

However, in its analysis, ANZ Research claimed that the recent spike in new housing loan approvals off the back of interest rate cuts, regulatory easing and public policy decisions has been countered by the continued lull in investor activity, which it claimed was triggered by APRA’s 30 per cent cap on interest-only lending.   

“Housing credit growth has remained subdued in this easing cycle (compared to other recent cycles) despite the dramatic turn in house prices since mid-2019 and the lift in new housing finance commitments,” the research group stated.  

“Lacklustre investor housing credit growth is the primary drag. APRA’s 2017 changes to interest-only loans is, we think, a significant contributing cause for the weak investor housing credit growth.

“That change considerably reduced the number of interest-only loans (as a share of all loans), which has led to a portion of housing debt that is being paid off faster than was previously the case.”


According to ANZ Research, the stock of new home loans would need to accelerate beyond historic levels in order to filter through to a notable pick-up in overall housing credit growth.  

Accordingly, the research group expects credit growth to remain subdued over the first half of 2020.

“The altered composition of housing credit means that, compared to two years ago, greater growth in new loans would be needed to achieve the same level of housing credit growth,” ANZ Research added.

“We think this effect will continue to restrain housing credit from increasing sharply through the first half of this year, even though we expect the housing market to continue its recovery.”

The analysis concluded by noting that the RBA would “remain relaxed” about the implications of a continued rise in residential property prices, with a disorderly spike in housing credit growth not expected.

However, ANZ Research concede that the central bank’s tone could shift in response to a rise in the share of interest-only loans, which would “accelerate” the rate of credit growth “quite quickly”.

[Related: ‘Cautious borrowers’ stunting credit growth]

Former APRA curbs still a ‘strain’ on credit growth

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Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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