APRA warns lenders over mortgage standards

August 02, 2011 

Michael Davis

http://www.australianbankingfinance.com/banking/apra-warns-lenders-over-mortgage-standards

The Australian Prudential Regulation Authority has reportedly warned bank boards against relaxing their mortgage lending standards to attract borrowers in a lower overall growth environment.

According to a report in the Australian Financial Review, APRA recently reiterated its concerns over the need for appropriate pricing, adequate loan-to-valuation ratios, loan serviceability and other risk criteria, in a letter addressed to the chairs of boards of banks, building societies and credit unions.

The report said APRA was concerned some lenders may be reverting back to “old normal” 2007 practices after tightening up lending standards during the GFC.

Examples of the old practices flagged in the letter were loan-to-valuation ratios rising to as high as 95 per cent and a rise in the point at which borrowers are required to pay for mortgage insurance.

The letter was not published on the regulator’s website and APRA would neither confirm nor deny to the AFR that such a letter had been sent.

http://www.apra.gov.au/adi/Publications/Pages/other-information-for-adis.aspx

Archived letters, notes and other advices for ADIs

http://www.apra.gov.au/adi/Publications/Pages/archived-adi-other-information.aspx