Finance Brokers Association of Australia (FBAA) regulatory compliance specialist David Carson said:

“This is a very blunt tool that has potential to hurt some groups more than others. APRA has effectively decided you can’t live in a home that costs more than six times your current income unless you have a very large deposit.

“A household with an annual income of $100,000 would be restricted to a loan of $600,000. With national median property prices closing in on the $900,000 mark these rules are definitely going to bite hardest on those seeking to enter the market or looking to upgrade if they don’t have substantial equity.

“It poses a very real risk that APRA may be putting unnecessary barriers in place for aspiring homeowners.

“Aspiring homeowners were recently given some encouragement with the expansion of the 5 per cent deposit scheme, allowing more prospective homeowners to move into the market sooner. The APRA debt to income ratio cap shifts the power back to those with large deposits.  

“The six times limit also overrides the responsible lending rules and consideration of whether a consumer has capacity to service a higher loan based on their expectations of future wage growth, how they manage their household expenses and how much capacity they have to service any proposed loan.

“The obvious question is how banks will determine the lucky 20 per cent they allow to exceed the six-times limit.

 “How will that cohort be chosen by the banks?

 “This has the very real potential to throttle the capability of the ordinary family borrower to buy a property and realise the benefits of home ownership.

“It is a material intervention from APRA, reminiscent of other interventions including the 3 per cent serviceability buffer on home loans and back in 2014 and 2017 respectively, placing limits on banks for the proportion of investor and interest only loans they could hold on their books.  

“It is usually the case that those most heavily affected by these actions are the ones closest to the thresholds. In this case, aspiring homeowners with lower household income and smaller deposits.

“APRA says it has data that suggests this might have a bigger impact on investors than homeowners although it is hard to see this being the case. APRA has also said there aren’t many lenders near the 20 per cent threshold, leading them to believe the immediate effects may be limited.

“With legitimate questions about how accurate their modelling and how robust the data is that these new rules are based on, the value of APRA’s new approach is open to question.”