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  • Banks need to show caution with APRA’s latest announcement

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    Today’s announcement by the Australian Prudential Regulation Authority (APRA) advising banks to restrict interest only loans to 30 per cent of total new residential mortgage lending is a cautious approach, but banks need to be mindful of the impact these changes will have on each state and territory.

    REIWA President Hayden Groves said the policy was suited to conditions currently facing the Sydney and Melbourne property markets, however they did not take into account Western Australia’s softer property climate.

    “While this policy will help east coast markets which are at risk of overheating, banks need to be mindful of the impact any blanket changes to lending regulations may have on the West Australian property market, where the economic and housing environment remains subdued,” Mr Groves said.

    APRA’s announcement also emphasised the need for banks to review and ensure that serviceability metrics, including interest rates and income buffers, are set at appropriate levels for current conditions.

    “It’s important this is carried out by the banks in a targeted way, whereby WA’s adverse economic and housing conditions are taken into consideration. Any form of curbing down lending would have a detrimental effect on our local market, which currently presents good opportunities for home buyers and investors, and we encourage banks to lend where and when possible.

    “A one size fits all approach is not the solution. It’s important the banks take into account the counter cyclical nature of WA’s economy and are not influenced by markets on the east coast,” Mr Groves said.

    Read REIWA's recent joint statement with UDIA WA about why tougher home lending conditions are not the answer in WA.