Did APRA already relax macroprudential 2.0?

Via Macquarie:

Following the introduction of APRA’s 30% interest-only cap there has been a material reduction in interest-only flow and assuming current trends continue banks will be well below the cap by the required timeframe (Sep-17). This was achieved by a combination of aggressive repricing, tightening of credit standards and some concessions from the regulator. We understand that adhering to the IO cap appears less onerous after the regulator relaxed their treatment of existing loan roll-overs into another interest-only period and lines of credit being excluded from the cap. While in the short term these actions reduce the risk around potential market dislocation, we continue to believe the current economics of IO borrowing is increasingly difficult to justify for customers. We expect more switching and slower growth in IO to result in a headwind to bank margins and medium-term profitability across banks’ mortgage portfolios.

Anyone got anything more on this?


  1. What rate do you think APRA would want house prices to continue to rise at?

    Makes sense they’d relax MP if they saw credit growth / house price growth really start to fall.

    • Technically I am not sure APRA should even care if house prices went up or down.
      From their Mission Statement: to establish and enforce prudential standards and practices designed to ensure that, under all reasonable circumstances, financial promises made by institutions we supervise are met within a stable, efficient and competitive financial system.

      ie it is not their goal to ensure house prices increase

      • “I want to point out that APRA’s measures are not targeted at high housing prices.[8] The international evidence is that these types of measures cannot sustainably address pressures on housing prices originating from the underlying supply-demand balance. But they can provide some breathing space while the underlying issues are addressed. In doing so, they can help lessen the financial amplification of the cycle that I spoke about before. Reducing this amplification while a better balance is established between supply and demand in the housing market can help with the resilience of our economy.”


    • Yep macroprudential regulation is an embarrassment and a joke.

      If anyone was taking the regulation of credit creation seriously it would be immediately obvious that decisions regarding changes in how the credit creation activities by private banks is regulated has the capacity to move markets.

      At the very least ALL changes to the regulations and practices relating to the creation of credit by private banks MUST be the subject of release to the general public in the same way as changes to interest rate policy is announced by the RBA.

      That people treat the regulation of credit creation as something to be done behind closed doors between financial sector insiders demonstrates two things:

      1. Very few people understand the significance of credit creation regulation

      2. Those that do are very determined for it stay that way.

      Even calling it something like Macroprudential regulation is an act of concealment as it does not clearly and simply state what we are talking about.

      Call it credit creation regulation as that at least captures the idea that it concerns regulating the “creation” of something by the private banking sector.

      Who knows people might then start asking what exactly are they creating and why does it need to be regulated?

      And that might lead to a few people working out that what we are talking about is the creation of something that is treated at law as if it were effectively public money.

      Then people might ask why on earth do we license private banks to create something like that at all?

  2. I can tell you there is a huge conversion of int only to p and I
    Noone is taking int only anymore
    5.4% int only inv
    4.7% int only owner occ
    3.8% p and i owner occ
    Everyone is starting to pay off their loans
    Deleveraging big time has started
    They will take the hand brake off because the Aust economy is going to fall off the cliff next year much more than MB is predicting

    • bcnich,

      If all of that is the result of whispers and arm twisting etc from APRA then every single communication that has given effect to those actions must be published on the APRA website so that everyone can see at the same time what “credit creation regulation” actions have been taken.

      These regulatory changes are important to very large financial decisions that most people only make once or twice in their life time.

      Having some people make those decisions without the benefit of insider information is outrageous.

      Banking and monetary system royal commission now.

      • matthew hoodMEMBER

        The Money Power! It is the greatest power on Earth; and it is arrayed against Labour. No other power that is or ever was can be named with it…. It attacks us through the press – a monster with a thousand lying tongues, a beast surpassing in foulness any conceived by the mythology that invented dragons, wehr wolves, harpies, ghouls and vampires. It thunders against us from innumerable platforms and pulpits. The mystic machinery of the churches it turns into an engine of wrath for our destruction.
        F. Anstey
        A RC will only come about when history repeats itself.

      • Hear, hear. The air in the smoke-filled rooms of APRA, RBA, ABA, LNP needs changing! Better still, the sunlight of a Royal Commission.

    • @bcnich
      Surely this thing can turn on a dime. If MP is starting to be relaxed, surely it that can only mean re-leveraging of credit (int only become more accessible again) and thus we continue on our merry way.

      Your’re too bearish for my liking (although I agree you in principal) – still a way to go and still many levers to pull before we hit full deleverage mode IMHO…

    • @bcnich, was it you with the connection to the RE agent in inner/east Melb with the information that the Chinese bid has been gone for months? If so, any update?

    • Thanks bcnich. You and your source have been have been on the money for months! It looks like the imploding stars are lining up – credit growth tanking, MP, Chinese bid…

      • Rage I think HH is even not bearish enough now. Finance is going negative, high AUD and bye bye Chinese – macro prudential is tight and Australian investors are gonski.
        Think China is going to slow but I believe Anna S Yang that China is a disaster
        But the big thing is the mortgage debt dropping and int only to p and I
        I think Melb and Syd property prices will be 10% lower if not 15% by end of next year even without a crisis
        It’s happening – things are slowing big time

  3. A supernova/ˌsuːpərnoʊvə/ plural: supernovae /ˌsuːpərnoʊviː/ or supernovas, abbreviations: SN and SNe) is an astronomical event that occurs during the last stellar evolutionary stages of a massive star’s life, whose dramatic and catastrophic destruction is marked by one final titanic explosion. This causes the sudden appearance of a “new” bright star, before slowly fading from sight over several weeks or months.

    • Even StevenMEMBER

      Effect on lending or effect on house prices? There’s plenty of evidence to show that the former has been impacted, but unfortunately not much on the latter. So far at least.

  4. this really shows that everyone is trying to prevent the bubble from bursting under their watch. As per Dingwall comments APRA should not be concerned where house prices go.
    it also shows everyone knows we have massive bubble and that once it goes off will bring total misery – will devastate the economy. And no one wants to say “look people we need to face this..” and deal with it. Naturally people hope that somehow we can just get through this mess if we only hang there for the next 5-8 years.
    But everyone that understands the situation also understands that this can come to an abrupt end. For APRA to loosen the rules means they did see enough evidence to convince them the music is about to stop – I am sure banks and other lenders talk to them.

  5. The finance minister should haul the whole board of APRA into his office and ask them one simple question.”should banks be lending money on interest only loans?” All those who raise their hands should be immmediateley dismissed.