Have the lending floodgates really opened?
/n June the Australian Prudential and Regulation Authority (APRA) announced its first relaxation of credit controls imposed on the banks since its imposition of much tighter controls in 2017. These had been imposed to wind back a ramp in lending to property investors, to put a ceiling on interest-only lending, and to force the banks to more thoroughly consider individual borrower’s living expenses.
From APRA’s perspective, this has had the intended effect on the property market. The rampant growth in capital city property prices was controlled, and risks to the financial system implicit in highly geared investors, and even owner-occupiers holding interest-only loans in a property market “bubble”.
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Loanscape has today released its Borrowing Capacity Index for Q2/2024. It shows that the borrowing capacities of Australian individuals and families have stabilised after the sharp decline over the past 2 years. Lower income borrowers continue to be disproportionately impacted by interest rate increases: the family income required to qualify for the average size loan in Australia is 35% higher than 2 years ago.