The prudential regulator has put banks on notice that they must be ready to rein in risky home loans made to highly indebted customers, after new data showed the number of mortgages to borrowers with high debt-to-income ratios eased from record levels following its targeted action last month.

In a letter to banks yesterday, the Australian Prudential Regulation Authority outlined new requirements, saying lenders would ″⁣need to have systems in place to limit growth in higher risk residential mortgage lending, such as loans at high debt-to-income multiples or high loan-to-valuation ratios″⁣.