Recent months have seen Australia’s banking regulator APRA finally get serious about doing what it can to cool the property markets in Sydney and Melbourne.
There have been a lot of headlines about the policy changes at the banks designed to dampen demand for investor lending, with the major banks increasing their interest rates on investor loans.
But it looks like they’re tapping down the amounts they’ll lend to people looking to by a home for living in, too. Deutsche Bank analysts Andrew Triggs and Anthony Hoo, in a recent note to clients, say that the mortgage borrowing limits appear to be falling across the board.
They share this fantastic chart which shows the ceiling on what major banks will lend to a person on $100,000 looking to buy their own home. You can see there have been cuts across the board as the banks work to reduce the risk on their loan books:
Many of the banks appear to have increased their limits following the RBA interest rate cut in May. But the APRA screws really started tightening in July, and the August data shows dramatic reductions at all of the lenders.
Westpac, which has the highest exposure of the major banks to the residential property market, has slashed its loan limit from $600,000 to $493,000.
APRA chairman Wayne Byers indicated to the Senate hearings on housing affordability earlier this month that:
Our objective has been to ensure that in the broader environment of high house prices, high household debt, historically low interest rates and subdued income growth – along with strong competitive pressures within the financial system – sound lending standards are maintained across the board. Thus far, we have not imposed formal regulatory requirements in relation to lending practices: put simply, we have requested banks to take a prudent view of borrower income, ensure they are not underestimating a borrower’s living expenses, and allow for the fact that interest rates will not always be as low as they are today. None of this should be seen as anything other than common sense.
We noted in July that there were major changes underway in Australian banks. This is evidence that the change is biting, and dramatically.