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Banking (prudential standard) determination No. 2 of 2025
Residential propertyResidential property
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Residential property
- A residential property exposure is an exposure where the predominant security is an immovable property that has the nature of a dwelling, and satisfies all applicable laws and regulations enabling the property to be occupied for housing purposes. Residential property includes the following exposure types:
- ‘Owner-occupied’ refers to a loan for the purpose of housing, where the funds are used for a residential property that is occupied, or to be occupied, by the borrower(s) as their principal place of residence. Where the loan is for a residential property that is different to the residential property against which the loan is secured, this definition refers to the occupation status of the residential property for which the loan has been obtained (not the occupation status of the residential property used as security). It includes:
- a dwelling or residential land that is vacant while under construction, but that the borrower intends to occupy as a principal place of residence; and
- a part-time residence that is the principal place of residence of the borrower(s).
- ‘Owner-occupied’ refers to a loan for the purpose of housing, where the funds are used for a residential property that is occupied, or to be occupied, by the borrower(s) as their principal place of residence. Where the loan is for a residential property that is different to the residential property against which the loan is secured, this definition refers to the occupation status of the residential property for which the loan has been obtained (not the occupation status of the residential property used as security). It includes:
Where finance is to be used for more than one purpose (e.g. owner-occupied, investment or non-housing purposes), the entire amount of the finance must be classified according to the predominant purpose (i.e. the purpose for which the largest share of the funds will be used). Where there is any doubt or ambiguity about whether a loan is for an owner-occupied or investment purpose, the loan must be treated as an ‘other standard residential property’ exposure.
- ‘Principal-and-interest’ refers to a loan on which interest is paid and principal is automatically amortised over the life of the loan.
- ‘Other standard residential property’ refers to any of the following exposures:
- loans for a purpose other than owner-occupation, including for investment or business purposes;
- interest-only loans with an interest-only term of five years or less, where only interest is paid and principal is not automatically amortised; or
- other loans that do not meet both of the criteria in paragraphs 14(a) and 14(b) of this Attachment.