Comments by chairman Wayne Byres are light at the end of the tunnel for brokers and lenders
Comments by chairman Wayne Byres are light at the end of the tunnel for brokers and lenders
The days are numbered for APRA’s investor and interest-only lending limits, comments by their chairman suggest.
Speaking at Customer Owned Banking Convention, Wayne Byres told delegates that “We would ideally like to start to step back from the degree of intervention we are exercising today. Quantitative benchmarks, such as that on investor lending growth, have served a useful purpose but were always intended as temporary measures.”
In order to remove such limits, explained Byres, APRA would need “to be comfortable that the industry’s serviceability standards have been sufficiently improved and – crucially – will be sustained.” Byres added that borrower debt-to-income levels would need to ‘appropriately constrained’ by lenders.
The industry was moving in the right direction, Byres said, pointing to tough serviceability standards, limits on policy overrides and the adoption of positive credit reporting. According to Byres “these developments should – all else being equal – provide an environment in which some of our benchmarks are no longer needed.”
Still a long way to go
Byres did not put a timeline on easing benchmarks but bank data suggests it is unlikely to be soon.
The four major banks were recently questioned on interest-only lending by the House of Representatives’ economics committee. Despite APRA’s 30% limit on new investor-only lending, it emerged that around half the loans on Westpac’s mortgage books are interest-only; the figure was 41% for NAB.
In new lending, however, there has been major progress, with interest-only lending dropping for the first time since the GFC in the June Quarter.
The Reserve Bank angle
Many have identified the RBA as the real driving force behind the restrictions on lending.
In its October monetary policy meeting, the RBA stated that that household balance sheets “remained a key area of attention for policymakers”. They also noted that high debt meant households were sensitive to any increases in interest rates.
However, the RBA recognised that the levels of interest-only lending and high LVR loans were declining, as had investor lending. Additionally, banks were already close to meeting ARPA’s capital requirements for 2020.
Yet the RBA concluded that “members discussed the importance of continuing to assess the various risks in household balance sheets.”
The days are numbered for APRA’s investor and interest-only lending limits, comments by their chairman suggest.
Speaking at Customer Owned Banking Convention, Wayne Byres told delegates that “We would ideally like to start to step back from the degree of intervention we are exercising today. Quantitative benchmarks, such as that on investor lending growth, have served a useful purpose but were always intended as temporary measures.”
In order to remove such limits, explained Byres, APRA would need “to be comfortable that the industry’s serviceability standards have been sufficiently improved and – crucially – will be sustained.” Byres added that borrower debt-to-income levels would need to ‘appropriately constrained’ by lenders.
The industry was moving in the right direction, Byres said, pointing to tough serviceability standards, limits on policy overrides and the adoption of positive credit reporting. According to Byres “these developments should – all else being equal – provide an environment in which some of our benchmarks are no longer needed.”
Still a long way to go
Byres did not put a timeline on easing benchmarks but bank data suggests it is unlikely to be soon.
The four major banks were recently questioned on interest-only lending by the House of Representatives’ economics committee. Despite APRA’s 30% limit on new investor-only lending, it emerged that around half the loans on Westpac’s mortgage books are interest-only; the figure was 41% for NAB.
In new lending, however, there has been major progress, with interest-only lending dropping for the first time since the GFC in the June Quarter.
The Reserve Bank angle
Many have identified the RBA as the real driving force behind the restrictions on lending.
In its October monetary policy meeting, the RBA stated that that household balance sheets “remained a key area of attention for policymakers”. They also noted that high debt meant households were sensitive to any increases in interest rates.
However, the RBA recognised that the levels of interest-only lending and high LVR loans were declining, as had investor lending. Additionally, banks were already close to meeting ARPA’s capital requirements for 2020.
Yet the RBA concluded that “members discussed the importance of continuing to assess the various risks in household balance sheets.”
