Housing market gets boost as APRA looks to review tight lending restrictions

23 May 2019

The federal election result appears to have given a boost of confidence to the housing market and to assist matters regulators are moving to ease up on their restrictive lending policies.

Hopeful buyers have been struggling to get finance in the recent tense lending environment and the Australian Prudential Regulation Authority’s review into its tighter lending policy should mean they can start borrowing more.

APRA is looking into ditching its rule that requires prospective borrowers to have their ability to service loans assessed at higher interest rates than those prevailing.

It is reviewing the 7 per cent minimum serviceability buffer and is aiming to settle on a new buffer determined by banks and lender and if that happens borrowers will almost certainly be able to borrow more.

The buffer was introduced to cool the booming housing markets in Melbourne and Sydney and APRA says it is now time to review it after pressure from the banking sector who say it’s the restrictive lending that’s a key driver of falling house prices.

APRA chair Wayne Byres told the 7 per cent buffer policy was introduced in 2014 and it may not be necessary anymore.

“APRA introduced the guidance as part of a suite of measures designed to reinforce sound residential lending standards at a time of heightened risk,” he said.

“With interest rates at record lows, and likely to remain at historically low levels for some time, the gap between the 7 per cent floor and actual prices paid has become quite wide in some cases – possibly unnecessarily so.”

With Labor losing out in the election, the property market will also continue on without proposed changes to negative gearing laws in a further boost to confidence.

The Property Council of Australia’s Ken Morrison is happy about the review into lending restrictions.

“(The move) recognises the changed circumstances in the current interest rate environment for lenders and the residential housing market,” Mr Morrison told

“It makes sense to revisit some of the measures originally put in place at the peak of the housing market. Different markets need different settings.”

“As APRA notes, this is not about easing sound lending standards but recognition that the interest rate environment has changed with interest rates now at a record lows, and likely to remain so.”


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