The Australian Prudential Regulation Authority has confirmed it is removing its 10 per cent benchmark on investor loan growth that it brought in in 2014.
The measure was brought in to tighten up on higher-risk lending and for banks to free themselves from the restriction they will need to show APRA three things.
Firstly, lending at the institution needs to have been below the investor growth benchmark for at least six months.
Secondly, their lending policies need to meet APRA’s serviceability guidelines.
Lastly, lending practices will need to be strengthened where necessary.
APRA chairman Wayne Byres says the benchmark can be lifted due to improved lending standards but there’s still work to do around strengthening the assessment of borrower expenses and debt commitments.
“APRA is therefore seeking assurances from ADI boards that they will maintain a firm grip on the prudence of both policies and practices,” he said.
The banking regulator still expects internal portfolio limits on lending at very high debt-to-income levels.
At this stage, APRA’s benchmark for interest-only lending will stay, but they will consider further changes down the track.