Our regulators have again taken action on mortgage lending, with the latest round of guidelines being provided to the banks.
While maintaining the 10% growth benchmark on investor lending that was introduced in late 2014, APRA has now added restrictions to interest-only lending with guidelines around 'Loan to Value' (LVR) ratios and has asked for increased scrutiny on loan servicability and higher risk segments.
APRA Chairman Wayne Byres acknowledged that a balanced approach is required at a time when there is a huge amount of newly completed product coming to the market that must be absorbed in the coming year.
The measures are intended to address the risks present in the current environment of high housing prices, rising household indebtedness, subdued income growth, strong competitive pressure and historically low interest rates.
Again, Developers will start to feel the pinch as their investor customers, both domestic and foreign, find the lending conditions and ability to settle further tightening, particularly in the apartment market.
APRA have warned that this is an interim position and it will continue to monitor conditions and react again as necessary if circumstances require.
Additional supervisory measures on mortgage lending have been announced to reinforce “sound residential mortgage lending practices in an environment of heightened risks”. The latest measures build on those communicated to authorised deposit-taking institutions (ADIs) in December 2014, aimed at improving the quality of new mortgage lending generally and moderating the growth of investor lending in particular. According to the regulator, this increased scrutiny has been in response to “an environment of heightened risks, reflected in an environment of high housing prices, high and rising household indebtedness, subdued household income growth, historically low interest rates, and strong competitive pressures”.