The Australian Prudential Regulation Authority keeps its mortgage serviceability buffer and policy settings the same.
by VT Markets
/
Jul 23, 2025
The Australian Prudential Regulation Authority (APRA) has chosen to keep its macroprudential policies the same. The countercyclical capital buffer will remain at the standard level of 1% of risk-weighted assets.
Moreover, the mortgage serviceability buffer will continue at 3 percentage points. These actions are part of APRA’s efforts to maintain financial stability in Australia.
Impact of Regulatory Stability
APRA’s decision to keep the current policies signals stability, which reduces uncertainty in the financial sector. This suggests that the implied volatility of bank stocks and the overall market may remain low in the near future. The S&P/ASX 200 VIX Index is currently around 12; this certainty encourages strategies that benefit from low volatility, such as selling options.
Not adjusting the serviceability buffer, even with high interest rates, reinforces that the central bank is primarily responsible for managing inflation. Recent quarterly CPI data shows inflation at 3.6%, indicating that interest rate cuts may be less likely in the short term. Derivative traders should consider positions that reflect a “higher for longer” cash rate environment.
For the housing market, this policy creates a steady lending atmosphere, encouraging consistent credit growth without fueling price increases. National home values have risen by 0.8% in May, according to CoreLogic, and maintaining the current buffer helps prevent market overheating. We view this as a positive factor for major lenders’ earnings stability.
History and Position on Serviceability Buffer
In late 2021, the authority increased the serviceability buffer from 2.5% to 3% to cool down a rapidly growing property market and enhance resilience. Keeping it at this level shows a continued cautious approach regarding household debt and financial stability risks. Thus, we should not see this unchanged policy as an “all clear,” but as a sign that the regulator is still vigilant.
Create your live VT Markets account and start trading now.
by VT Markets
Jul 23, 2025
Insights 
VT 
