subscribe to our newsletter sign up

Bad news for overcommitted property investors

Bad news

Lending watchdog APRA has today announced extra measures to monitor Australian mortgage lending, increasing pressure on stretched property investors in “an environment of heightened risks”.

APRA advised all authorised deposit-taking institutions (ADIs) to limit the flow of new interest-only lending to 30 per cent of total new residential mortgages and limit investor lending to remain under 10 per cent growth.

In addition, APRA said it expects lenders to ensure their interest rates, net incomes buffers and other serviceability metrics are appropriate, as well as restrain higher risk lending growth, such as loans with high loan-to-income rations, high loan-to-value ratios (LVRs) and extra-long terms.

“APRA expects ADIs to target a level of investor lending growth that allows them to comfortably manage normal monthly volatility in lending flows without exceeding this benchmark level,” APRA chairman Wayne Byres said.

“APRA views a higher proportion of interest-only lending in the current environment to be indicative of a higher risk profile. We will therefore be monitoring the share of interest-only lending within total new mortgage lending for each ADI and will consider the need to impose additional requirements on an ADI when the proportion of new lending on interest-only terms exceeds 30 per cent of total new mortgage lending,” Mr Byres said.

Loan providers will also be required to place internal limits on interest-only LVRs exceeding 80 per cent and be able to justify any exceeding 90 per cent.

Today’s measures build on those introduced at the end of 2014 aimed at improving the quality of new mortgage lending, and particularly moderating investor lending.

Following those announcements three years ago, auction rates fell to 50 per cent and price gains slowed.

Amid extraordinary price growth, the new string of measures may do the same to quell some of Australia’s heated property markets, especially in Sydney and Melbourne.

“This increased scrutiny has been in response to an environment of heightened risks, reflected in an environment of high housing prices, high and rising household indebtedness, subdued household income growth, historically low interest rates and strong competitive pressures,” APRA said in a statement.

“Given this environment, APRA has concluded that further steps to address risks that continue to build within the mortgage lending market are appropriate.”

Bad news for overcommitted property investors
nestegg logo
Promoted Content
Recommended by Spike Native Network
Philip - Perth - Anonymous, below is the one who doesn't know how this works. Company tax is NOT tax on shareholders - it's tax on the activity of the company AND.......
DJ - The ease of importing already skilled labour has also distorted the training & employment of locals as its now easier for business to import rather.......
Wildcat - The reason we are such a low taxing country is less than 50% of the population pays any net tax at all. More than 50% of the tax revenue is paid by.......
Dr Terry Dwyer, Dwye... - This is misleading since one has to add workers compensation, compulsory third party and super guarantee as quasi-taxes to compare with European.......