APRA has no plans to further tighten investor cap

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The Australian Prudential Regulation Authority (APRA) does not plan to further tighten the current cap on property investment lending.

According to a report in the Australian Financial Review, APRA chairman Wayne Byres said that the 2014 move to cap the growth of banks’ investment loan portfolios at 10% seems to be serving its purpose. As such, ARPA sees no need to adjust the current cap.

“It is all very well to say that 10% cap could be a bit high, and you could lower it by a couple of percentage points,“ Byres said.

“But actual growth in investor lending at present is down near 5%. I could lower the cap to 7%, but I don’t know what difference that really makes.”

He explained that the cap has always been intended to be temporary and APRA is now planning its next move, which may involve easing the cap.

Banks are also encouraged to assess mortgage borrowers’ ability to repay by implementing an interest rate buffer of at least 2%, with a floor of no less than 7%.

Byres explained that general interest rate movements up and down should not affect the bank’s serviceability standards.

“The 7% number is a useful mechanism to keep serviceability standards at a certain level,” said Byres.

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