APRA removes 10% restriction on investor loan growth

The benchmark, which was introduced in December 2014, was introduced to improve lending standards, APRA chairman Wayne Byres said in a letter announcing the change.

“Since the benchmark was applied in 2014, however, the ADI (authorised deposit-taking institution) industry has taken steps to improve the quality of lending and increase balance sheet resilience,” the chairman continued.

“There has been a clear reduction in higher-risk lending, with investor loan growth moderating, interest-only lending declining and high loan-to-valuation lending also markedly lower.

“There have also been improvements in lending policies, increasing the rigour of serviceability assessments for new borrowers. Accompanying this, there has been an uplift in capital resilience, as the industry makes progress towards the ‘unquestionably strong’ targets announced by APRA in mid-2017.”

As such, the investor loan growth benchmark has “served its purpose”.

Nevertheless, APRA will continue to monitor the housing market to ensure that the removal of the benchmark does not result in such rapid investor loan growth as to raise systemic concerns.

“Such an environment could lead APRA to consider, for example, the need to apply the counter-cyclical capital buffer or some other industry-wide measure,” Mr Byres warned.

However, the 30 per cent limit on interest-only lending will continue to apply.