What do APRA’s mortgage lending measures mean for property seekers?

The Australian Prudential Regulation Authority (APRA) recently announced that it will be introducing extra measures to improve the quality of mortgage lending in Australia and moderate investor lending. This comes in a response to increased housing affordability nationwide and a surge in investor lending, in conjunction with a fall in owner-occupied loans.

What exactly are the measures being implemented by APRA, and what do they mean for home loan seekers?

How is APRA trying to improve mortgage lending practices?

In response to unsustainable increases in investor lending, APRA is introducing Loan to Valuation Ratio (LVR) speed limit recommendations to keep this market from growing in excess of 10 per cent each year.

APRA expects lenders to limit new interest-only lending to only 30 per cent of total new residential home loans, and it wants the proportion of mortgages that have high LVRs (above 80 or 90 per cent) to dramatically reduce. The idea is that this will bring growth back to manageable levels, and moderate price increases in cities such as Melbourne and Sydney.

APRA is exerting its control on Australian mortgage lending practices. 

APRA is also trying to curb lending growth in high loan-to-income loans, high LVR loans, and long-term loans.

How will these measures impact property seekers?

Annual growth in investor lending of more than 10 per cent tends to drive housing prices up at unsustainable rates and lock a lot of property seekers out of the market, so these measures will be welcomed particularly by first home buyers – who may feel priced out of the market right now.

‘Our objective with these new measures is to ensure lenders are recognising the heightened risk in the lending environment,’ said APRA Chairman Wayne Byres in a press statement on March 31.

“APRA views a higher proportion of interest-only lending in the current environment to be indicative of a higher risk profile,” he added.

These measures indicate that APRA is clamping down on high-risk mortgage lending and doing its bit to protect both lenders and mortgage holders from experiencing volatile situations.

For those who feel short-changed by these new announcements, speaking to a mortgage broker can give you access to a wide range of lending products – which could see you find a highly competitive home loan.