APRA updates residential mortgage lending guidance and reporting

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The Australian Prudential Regulation Authority (APRA) has today released for consultation revisions to Prudential Practice Guide APG 223 Residential mortgage lending to incorporate measures either announced by APRA in December 2014 or communicated to authorised deposit-taking institutions (ADIs) since that time.



APRA has also released for consultation with ADIs proposed new reporting requirements for residential mortgage lending data.



APRA does not expect the revisions to APG 223 to result in material changes to existing lending practices for ADIs. The revised APG 223 does include more detailed guidance on the following areas:

• quantitative serviceability parameters including the application of interest rate buffers and floors, haircuts for non-salary income such as rental income, treatment of interest-only loans and estimation of living expenses; and
• other qualitative measures including meeting responsible lending obligations, monitoring serviceability policy overrides, and treatment of self-managed superannuation fund loans and other specific loan types.

Released on 5 November 2014, APG 223 summarises APRA’s expectations for sound residential lending practices, including guidance on addressing housing loan credit risk within an ADI’s risk management framework and applying sound loan origination criteria, verification procedures and security valuation methods, among other things.



On 9 December 2014 APRA announced further steps to reinforce sound residential mortgage lending practices — the revisions to APG 223 incorporate the serviceability requirements that were announced in December 2014 and reflect APRA’s supervisory experience in the subsequent period.



APRA has also released for consultation proposed new residential mortgage lending reporting requirements for ADIs. These proposed changes will enable APRA to maintain its supervisory intensity of residential mortgage lending and monitor emerging risks and trends while providing a more cost-efficient means of collecting this information.



APRA invites written submissions on the proposed revisions to APG 223 by 19 December 2016, and expects to finalise the revised guidance in the first quarter of 2017. The revised APG223 is available on APRA’s website.

APRA invites written submissions on the proposed reporting requirements on residential mortgage lending by 10 February 2017. APRA expects to finalise these revised reporting requirements in the first half of 2017 with reporting to commence from the December 2017 quarter. The discussion paper outlining the proposed reporting requirements, as well as the draft reporting standard, form, instructions and guidance, are available on APRA’s website.