Australia's banking regulator is considering lifting a limit on investor credit amid a slowdown in lending and falling property prices, Reuters reported March 2.
Wayne Byres, chairman of the Australian Prudential Regulation Authority, told a parliamentary committee on March 1 that the 10% annual limit on investor credit was "probably reaching the end of its useful life."
The regulator imposed the cap in 2017 to slow down mortgage lending and prevent a debt-driven property market bubble. The move helped slow down lending and cooled property prices, with home values in Australia's major cities down for a fifth straight month in February and investor loan growth below 5%, half the rate in 2014.
Removing the limit will allow banks to increase the amount of loans extended to investor and spur credit growth.
"The general dynamics in the market suggest it [the cap] is potentially becoming redundant, although there are some institutions still growing quite quickly," Byres added.
However, lenders may need to allocate more risk and capital to loans for investment purposes under proposed capital rules, potentially offsetting the impact of any rollback of the cap, the report said.
