Commercial lending and capital requirements to be targeted but investors and interest only not mentioned
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Commercial lending and capital requirements to be targeted but investors and interest only not mentioned
APRA has revealed its policy priorities for 2018, with bank capital requirements and commercial lending flagged for review.
Following the Basel Committee’s latest round of changes to bank capital requirements, APRA is now tasked with adapting these requirements to Australia. Banks are unlikely to see material changes this year, APRA notes: “given the need for extensive consultation, APRA does not expect to finalise the suite of prudential standards until 2019 or later.”
2018 will also see APRA develop a prudential practice guide for commercial property lending, an area in which the regulator has intervened heavily in recent years. However, no timelines is set for its publication.
The coming year could also see all authorised deposit-taking institutions (ADIs) given the right to call themselves banks. This depends on revisions to the 1959 Banking Act being passed; APRA would then by tasked with implementing changes.
Investor lending
What isn’t included among APRA’s 2018 priorities is investor lending.
Brokers and their investor clients have borne the brunt of APRA’s interventions in the sector, starting in 2015 with a 10% speed limit on bank investor lending growth which remains in place.
Last year saw increased regulation of interest-only lending, with banks being instructed to restrict interest-only loans to 30% of their portfolio.
Whilst investor lending has waxed and waned since – with many banks hitting the speed limit before slowing down – the long-term impact of APRA’s interventions has been to raise investor’s interest rates. Rates for investors are now almost always higher than for owner-occupiers; QBE predicts investor standard variable rates to rise to 6% in 2020, with owner-occupier SVRs rising to 5.5%.
Credit changes
The changing nature of APRA’s priorities may be due to recent changes in housing credit.
The growth in housing credit has slowed, growing by just 0.4% in December, the slowest growth in 20 months.
Investor lending is at a 13-month low, growing just 0.3% over December; owner-occupier lending rose 0.5%.
APRA has revealed its policy priorities for 2018, with bank capital requirements and commercial lending flagged for review.
Following the Basel Committee’s latest round of changes to bank capital requirements, APRA is now tasked with adapting these requirements to Australia. Banks are unlikely to see material changes this year, APRA notes: “given the need for extensive consultation, APRA does not expect to finalise the suite of prudential standards until 2019 or later.”
2018 will also see APRA develop a prudential practice guide for commercial property lending, an area in which the regulator has intervened heavily in recent years. However, no timelines is set for its publication.
The coming year could also see all authorised deposit-taking institutions (ADIs) given the right to call themselves banks. This depends on revisions to the 1959 Banking Act being passed; APRA would then by tasked with implementing changes.
Investor lending
What isn’t included among APRA’s 2018 priorities is investor lending.
Brokers and their investor clients have borne the brunt of APRA’s interventions in the sector, starting in 2015 with a 10% speed limit on bank investor lending growth which remains in place.
Last year saw increased regulation of interest-only lending, with banks being instructed to restrict interest-only loans to 30% of their portfolio.
Whilst investor lending has waxed and waned since – with many banks hitting the speed limit before slowing down – the long-term impact of APRA’s interventions has been to raise investor’s interest rates. Rates for investors are now almost always higher than for owner-occupiers; QBE predicts investor standard variable rates to rise to 6% in 2020, with owner-occupier SVRs rising to 5.5%.
Credit changes
The changing nature of APRA’s priorities may be due to recent changes in housing credit.
The growth in housing credit has slowed, growing by just 0.4% in December, the slowest growth in 20 months.
Investor lending is at a 13-month low, growing just 0.3% over December; owner-occupier lending rose 0.5%.
