Banks exceed APRA risk limit on investor lending

In December, APRA announced that it would be “further increasing the level of supervisory oversight on mortgage lending” in a bid to “reinforce sound residential mortgage lending practices”.

The banking regulator said one of its “specific areas of prudential concern” is when lenders increase their investor lending by more than 10 per cent during a year.

While APRA said this does not necessarily indicate wrongdoing or warrant any action, it did state that investor growth above 10 per cent would be “an important risk indicator for APRA supervisors in considering the need for further action”.

Released Friday, the latest APRA banking statistics for December 2014 show nine banks, including three of the big four, all fell under APRA’s risk indicator. 

Macquarie Bank recorded a 75.2 per cent increase in investor lending over the year to December 2014, while ME Bank grew its investor loan book by 40.5 per cent.

However, both banks grew their investor loan books by more than 10 per cent in the six months to December. 

From July to December 2014, Macquarie grew its investor loan book by 27.8 per cent, while ME Bank achieved 13.3 per cent investor loan growth over the same period. 

Suncorp Bank, which grew its investor loan book by 5.1 per cent in the six months to December, nevertheless recorded annualised 11.6 per cent growth in investor lending over the year to December 2014, putting it firmly above APRA’s 10 per cent risk indicator. 

Meanwhile ANZ, NAB and Westpac grew their investor loan books by 10.1 per cent, 12.4 per cent, and 10.5 per cent, respectively.

Teachers Mutual and P&N Bank both exceeded APRA’s 10 per cent risk indicator significantly, recording investor loan growth of 32.2 per cent and 24.7 per cent, respectively, for the 2014 calendar year. 

The Bank of China was the ninth lender to exceed the 10 per cent growth mark, with 12 per cent investor loan growth last year. 

In December, the prudential regulator told lenders that “prudential risks in the housing market appear to be increasing”, with strong mortgage competition “accentuating pressure on lending standards”.

“Against this backdrop, housing credit growth has accelerated, with lending to property investors particularly strong; the Reserve Bank of Australia has noted that this could be funding additional speculative activity in the market," the regulator said.

“These forces have contributed to strong house price growth, particularly when viewed against the more subdued growth in household incomes.”