The AFR has reported today that the Australian Prudential Regulatory Authority (APRA) is believed to be considering imposing a higher risk-weighting for mortgage loans made for investment purpose in a bid to curtail house price increases in Melbourne and Sydney. Brian Johnson of CLSA says that if APRA decided to lift the current risk weighting by 10% for such loans, the four major banks would be required to increase the amount of capital they hold by $5.3 billion, whereas the banks’ capital would rise by $40 billion in the event that the current investor risk-weighting was raised by 100%:
The risk weighting for home loans is currently 25 per cent regardless of whether the loans are for owner occupiers or higher risk property investors…
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