National mortgage group lays down law to regulator

Mortgage Choice has warned APRA that action against investor lending could damage Australia’s fragile economy.

The prudential regulator announced earlier this month that, while it had no current plans to cap any types of loan, it would pay close attention to specific areas of concern.

One concern APRA flagged was banks growing their investor portfolios by more than 10 per cent per year, which it called “an important risk indicator” that could warrant “further action”.

Mortgage Choice chief executive Michael Russell said he was “astonished” that APRA would want banks to keep their investor growth to less than 10 per cent.

“We have much more to lose if this APRA intervention goes ahead and slows down investor housing demand and broader economic activity,” Mr Russell said.

“Why? Because Australia is presently at a very critical juncture as we transition from the final phase of the mining boom to construction. A strong demand for investment property is crucial to this transition.”

Mr Russell said that with unemployment on the rise, especially in the mining sector, it made no sense to risk increasing unemployment in the construction sector.

“It is also worth noting that seasonally adjusted GDP growth in the September quarter was a paltry 0.3 per cent, or just 1.2 per cent when annualised,” Mr Russell said.

“Then consider that consumer sentiment this month plunged 5.7 per cent and is at its lowest level since August 2011.

“Consumer spending and investment is likely to be very constrained in the coming months – yet here we are trying to cool down those who are game enough to consider investing in property to grow their wealth and self-fund their retirement.”

Mr Russell also told APRA that any investor-induced crisis had already passed.

“While I could possibly understand if APRA announced its desire to curtail growth in investment lending 12–18 months earlier when dwelling price growth was surging, I can’t fathom why they would want to do it now given annual dwelling price growth has cooled from 11.4 per cent to 8.5 per cent in the past eight months without any need for regulatory interference,” he said.

Mr Russell also said that investors are assessed for finance at prudent buffers over current interest rates and that advance mortgage repayments are at historical highs.

Click here to read Mr Russell's full statement.

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