Restrictions placed on investors were only meant to be “temporary”, APRA’s chairman said, as the restrictions might have unintentionally caused additional profits for the big four banks.
Macroprudential measures were introduced in 2015 as a response to growing fears that the Australian mortgage market was becoming imbalanced. Little indication has been given since then about how long these constraints will be in place.
Now APRA says that it would like to start scaling back its intervention, provided that banks can continue to lend responsibly.
Speaking at the Customer Owned Banking Convention in Brisbane on Monday (23 October), APRA chairman Wayne Byres noted that since the regulator stepped in to curb certain types of credit, the quality of lending has improved and risk standards have strengthened.
“We would ideally like to start to step back from the degree of intervention we are exercising today,” Mr Byres said.
“Quantitative benchmarks, such as that on investor lending growth, have served a useful purpose but were always intended as temporary measures. That remains our intent, but for those of you who chafe at the constraint, their removal will require us to be comfortable that the industry’s serviceability standards have been sufficiently improved and — crucially — will be sustained.
“We will also want to see that borrower debt-to-income levels are being appropriately constrained in anticipation of (eventually) rising interest rates.”
Mr Byres stressed that APRA’s expectations apply across the industry — “to large and small alike”.
“Pleasingly, the industry is moving in the right direction to achieve that. Improved serviceability standards are being developed, and policy overrides are being monitored more thoroughly and consistently.”
The prudential regulator endorses positive credit reporting and believes that its take-up will remove a “blind spot” in a lender’s ability to see a borrower’s leverage.
Coupled with the higher and more risk-sensitive capital requirements, APRA is confident that these developments should provide an environment in which some of its benchmarks are no longer needed.
“The review of serviceability standards across the small ADI sector that we are currently undertaking will help inform our judgement as to how close we are to that point,” Mr Byres said.
His comments come after a parliamentary committee probed the major banks about their respective decisions to lift mortgage rates in response to APRA’s benchmarks.
Parliamentarians were eager to identify if the big four banks had profited from the regulatory measures.
MyState chief executive Melos Sulicich has called for government intervention as he believes that APRA’s actions have given the big four a competitive advantage.
The chief executive believes that APRA’s “speed limit”, restricting all banks’ investor lending to 10 per cent annual growth and interest-only lending to 30 per cent of flows, has “disproportionately constrained smaller banks’ ability to grow”.
“The larger banks’ investor loans are typically 35-45 per cent of their mortgage portfolios, while smaller banks’ investor loans are around 20-25 per cent of their loan portfolio.
“Instead of creating competition, this regulation has handed larger banks an advantage as rates on investor and interest-only loans increased.”
- Tags:
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Dominique discusses distressed properties, and how she goes about finding them in order to buy property well below market value. She shares the process of identifying distressed properties as well as the controversy surrounding this buying method.
If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: Facebook, Twitter and LinkedIn.
If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!
RELATED AREAS OF INTEREST:
3 big property investment myths busted open
5 steps to take on low-risk property developments
Securing finance after life-changing events: ‘Cash flow is key’
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More than just bricks and mortar, experts often regard property investment as a ‘game of finance’. As such, a good finance strategy can lead any investor to success.
Understanding the different financing options available to investors and how each of them can affect the growth of your portfolio is as important as mapping economic drivers and their influence on your assets.
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Is your property worth its weight in gold—from upfront costs such as deposit and stamp duty to ongoing costs including mortgage repayments and maintenance fees?
What is the difference between principal-and-interest loans and interest-only loans? Should you go for variable rates, fixed rates or split rates? Are offset accounts and redraw facilities worth the extra costs?
Are you getting the most out of your tax deductions? Is negative gearing a good strategy for you?
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The ability to set up finance structures that match the investor’s goals, capabilities and risk appetite spells the difference between those who can access finance for a multi-property portfolio and those whose lack of borrowing power had them stuck with one property.
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More than just bricks and mortar, experts often regard property investment as a ‘game of finance’. As such, a good finance strategy can lead any investor to success.
Understanding the different financing options available to investors and how each of them can affect the growth of your portfolio is as important as mapping economic drivers and their influence on your assets.
Being well-acquainted with the ins and outs of property financing starts in understanding mortgages and interest rates, knowing the difference between loan products and features and being able to comply with the rules of taxation.
Is your property worth its weight in gold—from upfront costs such as deposit and stamp duty to ongoing costs including mortgage repayments and maintenance fees?
What is the difference between principal-and-interest loans and interest-only loans? Should you go for variable rates, fixed rates or split rates? Are offset accounts and redraw facilities worth the extra costs?
Are you getting the most out of your tax deductions? Is negative gearing a good strategy for you?
What is the ‘capital to cash flow curve’? How can you improve your credit score and, ultimately, your serviceability?
The ability to set up finance structures that match the investor’s goals, capabilities and risk appetite spells the difference between those who can access finance for a multi-property portfolio and those whose lack of borrowing power had them stuck with one property.
A knowledge on finance can help you thrive through unpredictable market movements, allowing you to protect your asset through various safety buffers and even craft a potential exit strategy should you feel the need to postpone your wealth-creation journey—all without having to overcapitalise.
Smart Property Investment gives you an insight on various financial news and advice from experts and seasoned investors. We gather up-to-date data and information on states and territories’ annual budgets, RBA cash rate decisions, lending regulations, market trends on lending and finance and the government’s influence on property financing.
The Finance section also covers expert advice and investor stories that will help you improve your financial literacy and ultimately identify the most effective finance strategies and solutions in today’s property market
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string(2794) "Many investors who would have been successfully approved for finance last year are struggling now to either begin or continue their property investment journey because of the current financial climate.
In this episode of the Smart Property Investment Show, broker John Manciamelli and Momentum Media director Alex Whitlock joins host Tim Neary to discuss how APRA changes and the royal commission have resulted in a tighter lending economy and what that means for Australian investors.
They discuss what traps investors should avoid if they are trying to obtain finance, the four key growth drivers in a property market and unpacking trust structures while revealing one type of trust that you should miss.
If you like this episode, show your support by rating us or leaving a review on iTunes (The Smart Property Investment Show) and by following Smart Property Investment on social media: Facebook, Twitter and LinkedIn.
If you have any questions about what you heard today, any topics of interest you have in mind, or if you’d like to lend your voice to the show, email [email protected] for more insights!
RELATED AREAS OF INTEREST:
How technology is changing the lending environment
Lessons from a falling market
APRA investor measures have ‘run beyond their usefulness’: industry body
AREAS MENTIONED:
Hobart
Bondi
Deception Bay
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More than just bricks and mortar, experts often regard property investment as a ‘game of finance’. As such, a good finance strategy can lead any investor to success.
Understanding the different financing options available to investors and how each of them can affect the growth of your portfolio is as important as mapping economic drivers and their influence on your assets.
Being well-acquainted with the ins and outs of property financing starts in understanding mortgages and interest rates, knowing the difference between loan products and features and being able to comply with the rules of taxation.
Is your property worth its weight in gold—from upfront costs such as deposit and stamp duty to ongoing costs including mortgage repayments and maintenance fees?
What is the difference between principal-and-interest loans and interest-only loans? Should you go for variable rates, fixed rates or split rates? Are offset accounts and redraw facilities worth the extra costs?
Are you getting the most out of your tax deductions? Is negative gearing a good strategy for you?
What is the ‘capital to cash flow curve’? How can you improve your credit score and, ultimately, your serviceability?
The ability to set up finance structures that match the investor’s goals, capabilities and risk appetite spells the difference between those who can access finance for a multi-property portfolio and those whose lack of borrowing power had them stuck with one property.
A knowledge on finance can help you thrive through unpredictable market movements, allowing you to protect your asset through various safety buffers and even craft a potential exit strategy should you feel the need to postpone your wealth-creation journey—all without having to overcapitalise.
Smart Property Investment gives you an insight on various financial news and advice from experts and seasoned investors. We gather up-to-date data and information on states and territories’ annual budgets, RBA cash rate decisions, lending regulations, market trends on lending and finance and the government’s influence on property financing.
The Finance section also covers expert advice and investor stories that will help you improve your financial literacy and ultimately identify the most effective finance strategies and solutions in today’s property market
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