Regulator could favour banks over intermediaries

APRA’s latest banking statistics reveal that eight third-party lenders increased their investor volumes by more than 10 per cent during the 12 months to 30 November 2014.

It came after the prudential regulator announced last month that one of its “specific areas of prudential concern” would be when lenders increase their investor lending by more than 10 per cent during a year.

Mr Dalton, who is chairman of consultancy firm The Third Opinion, has more than 35 years’ experience in the Australian and New Zealand mortgage markets. He was a pioneer of Australian RMBS and was a key driver in the growth of the mortgage management sector.

Mr Dalton said that APRA might be worried that rapid investor lending growth is squeezing first home buyers out of the market.

However, Mr Dalton told Mortgage Business that APRA’s public statements were more likely to reflect the regulator’s underlying concerns about mortgage brokers.

The regulator could be “returning to the theme” that banks are sourcing too many of their loans from the broker channel, “with the inference being that broker loans are 'riskier' than direct-channel loans”, he said.

APRA could be concerned by the relationships that brokers have with financial planners, accountants and even property spruikers, Mr Dalton said.

“We [mortgage brokers] advocate residential investment and, in APRA's view, therefore, are exposing ADIs to an asset class that is absolutely too great in percentage terms, and relatively more risky,” he said.

APRA said last month that lenders are not necessarily doing anything wrong by increasing their investor lending by more than 10 per cent per year.

Instead, it said that double-digit investor growth would be “an important risk indicator for APRA supervisors in considering the need for further action”.