Home lending is expected to become easier for owner-occupiers though not so much for investors or ‘risky’ borrowers, following the release this week of changes to bank capital rules.
Banking regulator Australian Prudential Regulation Authority (APRA) has described its new Bank
Capital Framework as being more ‘risk-sensitive’, adding that it is designed to ‘strengthen financial resilience’.
The risk sensitivity will, in effect, be implemented through increasing requirements for higher-risk lending and decreasing it for lower risks.
Banks will be expected to differentiate between owner-occupier and investor loans, as well as principal and interest versus interest-only loans, with the latter in both cases considered to be riskier.
Which means that property investors, borrowers with small deposits or little equity, and those on interest-only loans, will find that the current higher interest rates they already face are likely to remain, if not increase.
The regulator doesn’t expect any significant market upheaval, however, since banks have known about the changes for over a year now.
