Australian financial regulator lifts restrictions on interest-only residential lending

The Australian Prudential Regulation Authority (APRA) has announced on Wednesday it will lift restrictions on interest-only residential lending in an attempt to boost the Australian property market.

APRA lifts restrictions on interest only residents Source: Bloomberg

APRA put the benchmark in place as a temporary measure in March 2017, as part of a range of actions to reinforce sound lending practices, leading to marked reduction 30% below the threshold.

“APRA’s lending benchmarks on investor and interest-only lending were always intended to be temporary. Both have now served their purpose of moderating higher risk lending and supporting a gradual strengthening of lending standards across the industry over a number of years.” APRA Chairman Wayne Byres said.

APRA said in a statement that ADIs (authorised deposit-taking institutions )still need to ensure they maintain adequate oversight of the level and type of interest-only lending, consistent with APRA’s prudential practice guide and ASIC’s responsible lending obligations on borrower requirements and objectives.

This follows the second lending restriction enforced by the regulator this year. APRA removed a restriction it had imposed on lenders in April, which required them to keep credit growth below 10% each year.

Australia’s house prices fall worst in years.

APRA’s lift on residential lending is an attempt to boost the Australian property market, after alarming CoreLogic data showed prices fell 0.7% in the last month.

December Sydney prices dropped 1.4% in November, with the popular city’s total decline down 9.5% -- figures comparable to 1989 and 1991 during a period of sky-rocketing interest rates.

Another poorly performing area was in Melbourne’s inner-east, with prices falling 12% and 9.4% in the inner-southern suburbs.

According to CoreLogic, both Melbourne and Sydney account for over half of the country’s total housing value, and are the main contributors driving the country's falls.

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