Aussie banks urged to curb growth in home loans to investors

Sydney

AUSTRALIA'S prudential regulator has called on banks to limit growth in home lending to investors to 10 per cent a year and said it will step up oversight of mortgages amid surging house prices in Sydney and Melbourne.

Banks should add a 2 per cent buffer to their home-loan rates and have an interest-rate floor of at least 7 per cent when assessing a borrower's ability to repay a mortgage, the Australian Prudential Regulation Authority (APRA) said in a statement on Tuesday. APRA's supervisors will review lending practices in the first quarter of 2015 to assess if further action is needed for individual banks, including possible increases in capital requirements, it said.