Easier home loan assessments worry APRA

The Australian Prudential Regulation Authority is uneasy over efforts by deposit-takers to relax lending standards in order to maintain new business levels on home loans.

APRA recently wrote to the chairs of boards of banks, building societies and credit unions to raise concerns over lending practices, the Financial Review reports.

The report says the APRA letter cites a drift back to loans with loan to valuation ratios of 95 per cent and higher threshholds for the borrower to pay the lender's fee for lenders mortgage insurance as two examples of reduced credit standards of concern.

One theme in the APRA letter, which the regulator has not published at its website, is that it may not be suitable for lenders to return to practices that were common before the financial crisis of 2008 forced lenders to tighten lending standards in order to ration credit.