riskier home lending that may be imposed with the hope of cooling down the property market. Therefore, it is imperative to take a look at the impact such lending restrictions have previously had not only on the property market, but also on borrowers and lenders. According to a new research conducted by the Reserve Bank of Australia, while such restrictions imposed between 2014 and 2018 did successfully cool down the housing market, it also enable the major banks in the country to win borrowers at the expense of smaller competitors.
In late 2014, the Australian Prudential Regulation Authority forced lenders to slash their annual growth in investor mortgages to 10 per cent. Subsequently, in 2017, banks were also required to reduce their interest-only mortgages by another 10 per cent, to 30 per cent of their total new housing lending. In order to comply with these regulations, lenders had to increase their interest rates on investor and interest-only mortgage products by 0.1 to 0.3 of a percentage point.
Meanwhile, the big four banks of Australia shifted…
