31 March 2017
Media Release - #2017027, 2017

Further APRA measures on residential mortgage lending

The Government welcomes the additional supervisory measures announced by the independent Australian Prudential Regulation Authority (APRA) today to address the build-up of risks associated with housing lending.

The announcement of further carefully calibrated and proportionate macroprudential measures demonstrates that regulators are alive to risks around housing market lending and household balance sheets, and will continue to reinforce sound lending practices by Authorised Deposit-taking Institutions (ADIs).

Over recent weeks I have noted increasing pressure on past measures to combat risks in housing lending. The growth rate of investor home loans had started to increase, with investor credit growth rising to 6.7 per cent through the year to February. I have also remarked upon the relatively high proportion of interest-only loans on housing lending and I welcome APRA’s tightening of lending standards in that area. I have also noted the additional measures taken independently by ADIs to limit future investor credit growth.

These latest measures follow December 2014 actions which have strengthened mortgage lending standards and had a dampening impact on investor credit growth. The introduction of the previous measures saw through-the-year investor credit growth more than halve from 10.8 per cent in May 2015 to 4.6 per cent by August 2016. The proportion of loans with small deposits declined and bank assessment of home loans improved.

The Government also notes APRA’s 10 per cent ‘speed limit’ on investor credit growth is maintained and will be strictly enforced, encouraging banks to remain ‘comfortably’ below the benchmark.

Australia’s independent financial regulators play an important role in helping to ensure Australia’s financial system is strong and stable and can withstand external shocks. These measures will help to provide stability to the housing market by reducing higher risk activity.