… our Chart of the Week shows that investment property loans (IPLs) and interest only loans continue to grow as a proportion of Australian housing loan approvals. In our view, there remains a high probability that risk weights for Australian mortgages will be lifted materially.
However, any delay in the introduction of new Basel IV capital requirements during this period of further interest rate cuts could lead APRA to adopt interim measures to constrain IPL growth rates.
APRA has stated that “there are other steps” it could take and it will “keep these under active review”. We believe it may consider the following: (1) a requirement for even tighter lending standards at the major banks (lower LVRs, lower LIRs; higher interest rate buffers); (2) a reduction in the 10% growth “threshold” for IPLs; or (3) an increase in risk weightings for IPLs relative to owner-occupier home loans.
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness.
Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.
