Bank regulator APRA is pondering the merit of compelling banks to apply larger interest rate payments buffers when assessing home loan applications.Glenn Stevens, governor of the Reserve Bank of Australia provided some glimpses into APRA and the RBA's analysis of macroprudential policy to the House of Representatives economics committee on Friday."I said somewhere a few months ago that we had thought about this, we had had some preliminary discussions with APRA, which we had, and we promptly had a flood of FOIs for all the documents," Stevens said."So we have thought about macroprudential tools. My view on them is they are a useful adjunct, but if we do use them we should go into this with a bit of realism. "Let's be clear. For a start, if we were to have, say, a loan-to-value cap, who do you think will be most affected by that?"It will be first-time buyers. I can imagine at the political level you will find that uncomfortable, should we proceed down that track. "Indeed, I think the New Zealand experience is that, when the central bank announced that [ie, macroprudential policy], the government felt obliged to do some offsetting things. So this is not necessarily straightforward."On the work that I have seen the most effective tool could be that when banks test people for an interest rate, so you are supposed to be able to make the payments not just at the current rate but, say, 200 points higher, APRA could insist that the test be made 300 higher, or 400, or whatever, so that people do not get overcommitted. "Phil Lowe, deputy governor, told the committee: "I think the benefit of that type of approach is it allows lower interest rates to feed through into lower servicing costs for both new and existing borrowers.""But it does not mean that lower interest rates keep on increasing the size of the loan that people can get access to, because the bank is applying a bigger buffer to the actual interest rate you pay. "I think there is quite a lot of merit in exploring that. I know APRA is discussing that at various levels with the bank lenders." But Lowe cautioned: "Macroprudential tools are very much like the tools we used in the 1970s and we ended up deciding we did not like those very much because you restrict one class of lenders, and the financial system is very flexible and another class of lenders comes up to fill [the gap]."