Andrew Mirams, managing director of Intuitive Finance, recently criticised the Australian Prudential Regulation Authority (APRA) for not providing a clear time frame for its macro-prudential measures or explaining clearly what it ultimately hoped to achieve.
Speaking on the Elite Broker podcast, Mirams said he didn’t forsee the complexities in the mortgage market easing anytime soon.
Following APRA’s crackdown on riskier forms of lending, Australian banks are required to limit their investor mortgage growth to 10%, while interest-only loans can only account for 30% of new lending.
“Late last year, [APRA Chairman] Wayne Byres came out and said these are all temporary measures. But he’s never articulated to anyone about how temporary or what measures might change in the future or what their actual outcome [was intended to be],” Mirams said.
“I think a lot of the things they’ve done, they’ve got right. An investor getting a 97 per cent interest-only loan just didn’t make sense. You’re just putting people at risk should the markets move, and we all know markets move at different times.
“But they haven’t articulated what they were trying to achieve, what sort of timeline and what outcomes they are hoping to get. I think that would help all of us manage client expectations. Because all of us will have lots of clients that are getting frustrated with being told ‘no’. And you can’t really give them an outcome of what or when they might be able to move again.”
Speaking at the Customer Owned Banking Convention in Brisbane last October, Byres said APRA would eventually begin scaling back on its intervention, provided the banks can continue to lend responsibly.
“We would ideally like to start to step back from the degree of intervention we are exercising today,” he 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.”
While macro-prudential measures are a relatively new means of controlling market forces, they’ve become increasingly popular around the world. They’re currently being implemented in the United Kingdom, New Zealand, and Hong Kong.