We know that the APRA has tightened the screws recently and has pressured lenders in making it harder for us to get loans via more stringent criteria to slow down the growth in the major markets ie: Sydney, Melbourne etc. But does anyone know in detail what these are? Also I've heard that this is only the first stage and there is another stage of tightening coming soon if the market doesn't cool off. Does anyone know what exactly they have changed or are changing?
The three major changes are the methods banks use to calculate max borrowing, restricting LVR's on investment loans and marginally higher rates for IP loans. With max borrowing - there used to be "generous" lenders who would calculate the debt you held with other banks at actual repayments. They are now using an "assessment" rate or loading which means the debt you hold with other banks is now calcuated at a higher amount (the repayment on your 4.3% interest only loan with bank xyz might now be calculated by as a debt of 7.4% principal and interest when the bank assesses your borrowing capacity). Some banks have gone a step further and restricted LVR's on investment loans. Bankwest and Heritage for instance will only do 80% IP loans now. ING will do 80% on NSW properties. Is there going to be additional changes? Possibly. I assume they'll analyse the impact of the above in the coming months and decide whether or not additional tweaking is required. Cheers Jamie
APRA govern the prudential supervision of banks and NBFIs such as credit unions etc. They can implement policy changes at any time to address systemic risks. Recently APRA flagged to lenders the concern shared with Treasury that the lenders risk exposure was increasing and a market correction AND a increase in rates may impose serious credit concerns. So they told the banks to limit some practices they identified as a concern and cautioned if the banks didnt act to do so immediately then APRA would instruct them through regulations. http://www.apra.gov.au/mediareleases/pages/14_30.aspx
