Lenders have now accepted APRA's tougher stress tests.
The regulator prefers a 7 per cent interest rate floor when deciding whether borrowers can handle future rate rises. This will caused some banks to lift their tests by a full percentage point.
"Typically you may have had a benchmark that was maybe 150 to 200 basis points above the variable home loan rate, in practical terms that means something like 6.5, 6.25 to 6.5 per cent," he said.
The big four and smaller lenders have also tightened income assessments.
That means not counting 100 per cent of rental income, dividends, bonus pay and other highly uncertain earnings.
It also means banks are now looking at borrowers' actual spending, not just using a standard poverty-line benchmark which many had used previously.
The banks are setting quite aggressive sales targets to their loans officers, often linked to bonus and incentive payments.
At present ING Direct - which already had tighter lending standards than many institutions, with a floor stress test rate of 8 per cent - made New South Wales a special case, telling brokers it would not accept investor loans for more than 80 per cent of the property's value.
Anywhere else in the country, 90 per cent is its new loan-to-value limit for property investors.
It also joined a large number of banks cutting interest rate discounts for investment loans, across the board from the vast majority of lenders, where discounts that were otherwise applied to investment lending are being removed.
"That's going to have an impact across the market."
'Risk increases' as borrowers look beyond banks
APRA only regulates authorized deposit taking institutions, such as banks, credit unions and building societies.
A raft of mortgage finance companies can largely set their own standards.
"History has shown us that when you restrict access to conventional finance and credit consumers then go and find it elsewhere, and the level of risk to them increases," he warned.
This could open up a can of worms in regards to cowboy lending companies, and possible rogue behavior within bank branches.
"Many mortgage brokers have stories where they've assessed that a loan would not be in the interests of a borrower and then they've the borrower gone down to the local branch of the bank and the bank has written the loan," he said.
The big concern is that the incentive-based model that got the big banks in trouble over dodgy financial planning also exists for home loans.
That means the culture at the coal face may not reflect the standards set at head office.
The issue they have difficulty managing is at the branch level they're setting quite aggressive sales targets to their loans officers, often linked to bonus and incentive payments, and that's where the opportunity for poor practices and over-aggressive lending can come in.