Who benefits from the scrapped APRA lending cap?

Two mortgage brokers talk about how this might affect investors

By Abel Riototar

02 May 2018

Property investors are said to be the primary beneficiaries of APRA scrapping its housing investor loan cap, according to comparison site Mozo.com.au.

The banking regulator placed a limit on ADIs in 2014 to cap investor lending growth to no more than 10% of new lending per year in order to cool the overheating housing markets in Sydney and Melbourne and reduce higher risk lending.

“The removal of the cap could see further downward pressure on mortgage rates for investors,” Mozo’s property expert Steve Jovcevski said in a statement. “We’re expecting banks that may have previously shelved their investor loan business to keep within the growth limit, to start actively pursuing investors again with huge interest rate discounts.”

Will it really cause a huge impact?

“I don’t see this having an immediate direct impact on brokers other than providing a bit more certainty when submitting an investment loan,” Neue Black founder and CEO Marshall Condon told MPA.

He believes the change is the first of many more to come in investment lending as the market cools a little quicker than regulators had anticipated, and as reports of property supply issues on the east coast loom.

Although the cap may not create an immediate or direct effect on investors, Condon said it shows that regulator sentiment around investment lending and the property market is changing. Regulators were previously concerned that the market was at high risk of a correction. Now that things are settling down, property investors should be more confident, he said.

Confidence Finance director Redom Syed also thinks that removing the 10% cap will have little effect on investors. “In this current credit climate, banks can’t reach the cap, so having it in place is redundant for now,” Syed told MPA. “It’s very much ‘job done’ for this cap.”

He believes investors will unlikely see any upside from it. Syed points out that in the same APRA announcement “there’s a strong reference to maintain stringent serviceability frameworks, which have been the main source of pain for investors”. That means borrowing will remain tight for investors.

Pricing of investor loans may have moved back at the level of owner occupier loans, but Syed thinks lenders would unlikely want to follow anytime soon.