RBA considers reduced investor lending growth

Ian Rogers
A decline in approvals for investor housing loans in the order of ten per cent to 20 per cent was considered as a policy goal by the Reserve Bank of Australia late last year, as it worked with APRA on formulating a soft macroprudential policy target for the banking sector.

"Staff projections suggest that only a moderate decline in system investor loan approvals would be required to meet a benchmark growth rate for investor housing credit in the five per cent to seven per cent range for calendar 2015," RBA analysts in the Financial Stability Department wrote in a paper released yesterday under the Freedom of Information Act.

"The exact size of the decline depends partly on assumptions about repayments through churn, refinancing and amortisation in the investor housing book. For a reasonable range of values for this implied repayment rate, and assuming that investor housing credit growth remains at its current rate for the remainder of 2014, the required decline in investor approvals is of the order of ten to 20 per cent.

"This would take the level of investor housing loan approvals back to that seen a year ago."


The central bank, and banks dependent on it for funding through the Committed Liquidity Facility, have framed their thinking on the basis of growth in housing credit of seven per cent annually, a level only recently consistent with actual credit growth, the RBA papers show.