Loan and behold
APRA is tightening its grip on high-risk borrowers as investor lending surges and the big banks begin edging away from the most highly geared loans.
The Australian Prudential Regulation Authority (APRA) has fired a warning shot at the nation's banks as the industry grows nervous about scorching lending growth and speculative property investors.
The regulator announced that from February, banks won’t be able to approve more than 20% of new lending each quarter to borrowers with a debt-to-income (DTI) ratio of six or above.
APRA has previously stepped in with macroprudential measures when property markets overheated in 2014 and 2017. This is the first time it has imposed DTI limits, in a sign it is becoming increasingly uneasy about investors who are more leveraged and more risky than owner-occupiers.
Some smaller institutions are already getting close to those limits, APRA said. While the big four banks remain well below that threshold, the move is a pre-emptive strike in a market where investor loans are growing fast — surging almost 18% in the September quarter alone, per ABS data.
