While it's a step in the right direction, APRA's recent announcement of relaxation of its lending cap is unlikely to make things easier for property investors just yet .
On Thursday the Australian Prudential Regulation Authority (APRA) announced that as of July 1st it is removing restrictions that keep investor credit growth under 10 per cent a year, replacing them with more permanent measures to strengthen lending standards.
With our housing markets slowing and credit growth slowing APRA said it would remove the cap for banks that could prove they had been following its guidelines on prudent lending.
"The temporary benchmark on investor loan growth has served its purpose. Lending growth has moderated, standards have been lifted and oversight has improved," APRA Chairman Mr Wayne Byres said.
These restriction on lending to property investors were introduced in 2014 at a time when the Sydney and Melbourne property markets were booming which caused the regulator to worry that highly leveraged property investors were ratcheting up risk in the banks and the broader economy.
An additional restriction introduced by APRA last year required banks to keep interest-only loans to less than 30 per cent of their mortgage portfolio, and this still remains in place for the time being, but is likely to be removed soon.
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APRA said for the 10 per cent speed limit not to apply, banks will be expected to confirm that:
- Lending has been below the investor loan growth benchmark for at least the past 6 months;
- Lending policies meet APRA's guidance on serviceability
- Lending practices will be strengthened where necessary.
APRA also said there was "more to do" in improving other aspects of banks' lending, including how they assessed borrowers' expenses, their existing debts, and the approval of loans that fell outside of banks' formal lending policies.
Despite the perception of loosening of macro prudential controls, what's holding back investor finance at present is higher serviceability hurdles to jump through for new loans to comply with APRA's Responsible Lending guidelines.
So while this move is a step in the right direction, it's currently still much more difficult to get a loan than it was a few years ago.