Australia's banking regulator says lending to property investors has accelerated in recent months and warned lenders they should be "under no illusion" that it will intervene if limits on lending growth are breached.
Australian Prudential Regulation Authority chairman Wayne Byres says measures such as a 10 per cent cap on growth in new investor loans has slowed investor lending, which is now growing in single figures compared to the double digit acceleration earlier.
However he warned there had been a pickup in recent months.
"At least for the time being, the benchmarks that we communicated - including the 10 per cent benchmark for annual growth in investor lending - remain in place and lenders that choose to operate beyond these benchmarks are under no illusions that supervisory intervention is a possible consequence," Mr Byres told the A50 Economic Forum in Sydney on Friday.
"If that is encouraging them to direct their competitive instincts elsewhere, then that's probably a good thing for the system as a whole."
Australian banks have tightened lending criteria for property investors over the last year, particularly for foreign investors, in response to APRA's 10 per cent cap on lending growth in the investor market.
However, the Reserve Bank of Australia cut rates to a record low of 1.5 per cent, which has continued to boost the housing market, albeit at a slower pace.
Housing loans to investors fell in December, but the sector is still showing solid growth in trend terms, accordng to data released by the Australian Bureau of Statistics on Friday.
Earlier this week, the country's largest lender Commonwealth Bank said it will stop accepting refinancing applications for investment home loans, in order to meet its "regulatory obligations".
CBA's subsidiary, Bankwest, also said this week it had stopped accepting new business from customers seeking to refinance investor home loans.
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