A leading economist has warned that the major banks could soon be targeted by the prudential regulator after fresh figures point to continued growth in investor lending.
While APRA is yet to take any regulatory action against Australian lenders in terms of higher capital ratios against their investor loan books, a 10 per cent growth threshold is cause for concern, according to AMP Capital chief economist Shane Oliver.
Mr Oliver told Mortgage Business the national average growth of investor loan books is already at 10 per cent.
Released yesterday, the RBA's financial aggregates for February show that credit for investor housing grew by 10.1 per cent over the 12 months to February.
“I can imagine a situation where the investment figures remain high until the point a bank will be forced to increase its capital ratio,” Mr Oliver said.
“If 10 per cent is the average, you have a couple which are above that.”
Mr Oliver said the major banks based in Sydney that lend to Sydney investors are more likely to come under APRA’s spotlight.
“If you have the bulk of your residential lending business in Sydney and the RBA has flagged Sydney investor lending as increasing 150 per cent over the past three years, you can bet your bottom dollar the Sydney-based banks – CBA and Westpac – are the ones to look at more closely.”
APRA’s latest monthly banking statistics for February, released yesterday (31 March),show three of the four major lenders grew their investor lending by more than 10 per cent over the past 12 months.
NAB grew its investor lending by 13.3 per cent in the 12 months to February, while Westpac and ANZ saw 10.2 and 10.3 per cent annual growth respectively.
CBA was the only major bank to grow its investor lending by less than 10 per cent, with 9.2 per cent growth in the 12 months to February.
“It wouldn’t surprise me if APRA decides to hit one bank in a few months,” Mr Oliver said.
He added that the RBA’s clear easing bias sends a clear message that it is relying on APRA to cool the investor market.
“I think they will cut rates in May,” Mr Oliver said, adding that he has little confidence that the central bank will lower the cash rate next week.