APRA - Announcement on Prudential lending

[Redom]

Heya,

Long time coming, another step up from APRA in supervising lending standards through the current upswing in the housing cycle.

No specific action but focussing on the 'counselling' of lenders to ensure prudent standards. I'm not sure how this will flow through to investors, but it could signal some action in the near future and further marginal shifts in lending policy.

I think the key message here is: This guidance will primarily guard against any further relaxation in standards.

http://www.apra.gov.au/MediaReleases/Pages/14_30.aspx

Cheers,
Redom

 

[bumskins]

http://www.smh.com.au/business/bank...in-attack-on-risky-loans-20141209-123jjx.html

I think they are doing the necessary posturing prior to cutting rates. I think they may be stepping up the timeline of macro prudential inline with the increasing probability and timeline of cutting rates.

The only reason rates haven't been cut below current levels is housing price growth, so I think the RBA will want that in place first.

 

[Marty McDonald]

I think its going to be increasingly hard to get IO repayments above 80% LVR approved and almost impossible for PPR purchases. While not mandated by APRA across the board it sounds like they will slap a lender or two if they think they are doing this too much.

I have already had one request for IO on an investment purchase knocked back by Nab at 95% LVR (with ample surplus income).

 

[C Stewart]

I think there is sufficient competition in the market to ensure banks will keep offering IO on higher LVR's. My take on this was it was as much about bank's capital as lending products. There has been growth in risker lending products (in APRA's view) so they want to make sure bank's capital is in line with their loan book. So rather than ban particular product offerings, its more a make sure everything is in proportion exercise.

 

[Rolf Latham]

Lending standards have been marginally to moderatley tightening in the last 6 to 9 mths in my experience, rather than relaxing.

Part of the challenge for regulators when they look at large scale macro data, the reality of on the ground policy doesnt get through.

some of the lenders with particular exposure to niche things like bwa 95 % + call cap LMI, i am seeing the credit scoring making these transactions much harder to get onto.

Whats much more of a bother to me is the exposure that some lenders are taking on in the slightly "non complying" space, to drive niches for bank funded franchises/warehouses. While only a weeny portion of the funding, its this area that may have the biggest shake up.


ta
rolf

 

[Shahin_Afarin]

I agree and I am personally seeing tougher rules and policies for equity releases which is why I keep saying to people to pull out money whenever they can because you never know when lending appetite may change.

 

[Rolf Latham]

which is why I keep saying to people to pull out money whenever they can because you never know when lending appetite may change.

thats gold right there

personal risk management and Prudential work !

ta
rolf

 

[bumskins]

Lending standards have been marginally to moderatley tightening in the last 6 to 9 mths in my experience, rather than relaxing.

Part of the challenge for regulators when they look at large scale macro data, the reality of on the ground policy doesnt get through.

some of the lenders with particular exposure to niche things like bwa 95 % + call cap LMI, i am seeing the credit scoring making these transactions much harder to get onto.

Whats much more of a bother to me is the exposure that some lenders are taking on in the slightly "non complying" space, to drive niches for bank funded franchises/warehouses. While only a weeny portion of the funding, its this area that may have the biggest shake up.


ta
rolf

I think the regulator is taking issue with the prevalence of investor loans, percentage of Interest Only Loans and level of high LVR loans. Banks don't need to change policy for standards to drop, they can even tighten policy but standards drop because they take an increased proportion of investor/high LVR loans.

 

[tobe]

If APRA wants to dampen Investors they should have a higher plug rate for investors, and a rate margin for Interest Only.

Anything else will adversely effect first home owners.

NB, investors should be defined as anyone with more than one property to avoid the "I intend buying a PPOR and then changing their minds later and rent it out" crowd.