The Australia Prudential Regulation Authority (APRA) has successfully reigned in investment lending, after making a number of moves to tighten the growing sector.
APRA is the body that regulates banks in Australia. Last week, APRA Chairman Wayne Byres said big banks had been offering ‘easy money’ to investors, with some lending up to 50% above more conservative lenders.
This information came off the back of a borrower survey conducted by APRA with financial institutions around Australia.
Mr Byres warned that some lenders were assessing credit based on living expenses that were actually lower than what the borrower declared.
Another concern was that lenders were not being conservative about income declared on the rental income of investment properties’. In some cases, lenders relied on prospective tax benefits accrued from negative gearing, just to get a borrower approved.
So it looks like certain lenders (primarily banks, building societies and credit unions) will be under APRA’s microscope. ABC.net.au reported that Mr Byres made the following statement at his recent conference.
"ADIs [lenders] have now had long enough to revise their ambitions where needed, and we will be watching carefully to see a moderation in growth in investor lending in the second half of the year as revised plans are implemented,” he said.
"ADIs with more aggressive practices should fully expect to find APRA increasingly at their doorstep."
Now that the investment sector is set to tighten, some industry-heads speculate that owner-occupiers will get more of a break. Head here for more on this forecast.
Talk to a Capita mortgage broker about getting the most out of your investment loan.
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