The Australian Prudential Regulation Authority (APRA) will soon remove a lending restriction for property investors. APRA chairman Wayne Byrnes recently said the 10 percent limit on bank lending imposed in 2014 would be scrapped.
The lending restriction along with the limit on interest-only lending were meant to strengthen major bank balance sheets and limit the flow of speculative money into the property market. Since the two measures were implemented, banks also made changes to their policies such as increasing interest rates and requiring bigger deposits for investors. As a result, more first homebuyers entered the property market.
APRA chairman Wayne Byres noted that the lending restrictions they imposed served their purpose. He cited that “lending growth has moderated, standards have been lifted and oversight has improved.” Risks, however, remain and certain lending practices stil need to be strengthened, Byres added.
Banks allowed to remove the 10 percent restriction are those that have maintained investor lending growth below the benchmark for six months, those that meet current serviceability guidelines and those committed to strengthen their lending practices.
For his part, Market Economics chief economist Stephen Koukoulas is predicting a strong rise in investor lending in the second half of 2018 as a result of this move. He noted that the 10 percent threshold proved useful as banks were made aware to maintain their good credit performance.
On the other hand, AMP chief economist Shane Oliver described APRA’s pending removal of the lending restriction as a move that makes sense considering the drop in investor lending activity.
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By Wendy Chamberlain
Copyright 2018 | All Rights Reserved
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With a passion for all things real estate spanning over 20 years, Wendy loves that her role as a Buyers Agent or Sellers Advocate gives her buying and selling clients an experienced voice they can trust when it comes to negotiating to buy or sell something as important as their home or investment. Wendy considers it a privilege to be asked to help others realise such an important goal as home ownership and to be trusted with that honour. Get in touch today via www.chamberlainadvocates.com.au for a no obligation chat about how Wendy can work with you and help you save time and money to secure your new home sooner.
