APRA just released its quarterly banking data, revealing that ADIs have begun to overcome their aversion to riskier lending, perhaps in a bid to remain competitive amidst the onslaught of new lenders coming into the market.
The data shows that new residential home loans to borrowers with a high debt-to-income ratio increased by 22.3% between the September and December 2019 quarters.
Low deposit loans, defined as those with an LVR of 95% or higher, jumped 17.5% from the previous quarter, with interest-only loans increasing by 7.9% over the same time period.
Source: APRA
According to Sally Tindall, research director at RateCity.com.au, the banks are opening their doors after “years of belt tightening”.
She explained, “APRA’s caps on investor and interest-only loans, and the fallout from the royal commission, led to a significant crackdown in home lending,
“Since APRA lifted its caps and revised some of its serviceability guidelines, banks have been able to attract more business through their door.”
Highlighting Tindall’s point, many banks made the most significant reductions to their interest-only investment rates following the series of RBA cash rate cuts executed in recent months.
“Over the last few years, some banks overshot APRA’s benchmarks. But they’ve now made it clear they are re-open for business, not just for owner occupiers, but for a wider segment of the market,” said Tindall.
