So gentle was this macroprudential-lite move that banks braced for the second shoe to drop.

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Even a few weeks ago APRA was considered an odds on bet to raid its macroprudential toolkit in the near future to deliver some real action - like the imposition of debt-to-income ratio.

And speculation around using debt-to-income or loan-to-valuation tools gained a bit of currency last week when, via a consultation update, APRA asked banks to ensure they had “the ability to limit” lending to riskier borrowers, based on these measures.

But for APRA there is a secondary balancing act. It is strongly disinclined to disadvantage some types of borrowers - particularly first home buyers and owner-occupiers.

“The step we took (is) like buying a little more insurance so that borrowers will not be overextended themselves”, Byres said.

APRA’s response requires it to work out the problem that needs to be solved and then what tools can be employed for different problems, he said.

“You don’t have to hit everything with a hammer,” was his analogy.

But will some heavy tool need to be used or any tool at all?

That’s where listening to Byres becomes even more frustrating.

On the one hand, he floated that a potential rise in interest rates could act as a self-correcting mechanism to take pressure off the problem. It would reduce demand for borrowing and take the strain from rising housing debt that arose from the current ultra cheap finance that has enabled so many to jump into the home market.

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On the other hand, Byres said, “If that wasn’t to be the case and credit growth continues to accelerate and accelerate and accelerate, and household debt levels continue to rise then maybe there would be a trigger for more action on our part.”

He also acknowledged that some lenders have started to move on interest rates, with fixed loan mortgage rates for new customers now starting to edge up. But he also noted that some variable rates were coming down.

“Banks are rejigging their pricing - we haven’t yet got to the point where it’s pretty clear rates are ratcheting up.”

Where investors don’t need direction from Byres is that the growth in house prices has been trending down since early this year. But we don’t know whether this is happening fast enough to ward off intervention. We also know that financial markets are betting on rates moving up next year.

It appears that when it comes to the need for a second and bigger regulation tool, APRA is having a bet each way.

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