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Mortgage Choice has warned that new rules on investor lending would pose serious risks to first home buyer numbers and housing demand.
Chief executive Michael Russell said he was "astonished" by APRA's recent decision to warn banks about their investor portfolios.
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The prudential regulator announced earlier this month that while it had no current plans to cap any types of loan, it would pay close attention to specific areas of concern.
One concern APRA flagged was banks growing their investor portfolios by more than 10 per cent per year, which it called "an important risk indicator" that could warrant "further action".
Mr Russell said regulators were nervous because the buoyant investor market had increased property prices relative to household incomes.
"However, the risks APRA's actions pose to housing demand, construction employment and broader economic activity are very concerning," he said.
Mr Russell also said APRA may not realise that any decision to cap investor lending could further restrict first home buyers entering the market.
"Our research clearly shows first home buyers are increasingly choosing to buy an investment property before an owner-occupied property because it allows them to buy where they can afford and still live where they want to," he said.
"Moving forward, I would hope that the state and federal governments give this decision a lot more consideration and soon take the lead in a consultative phase with APRA."
Mr Russell also said a reduction in investor lending could weaken the fragile Australian economy just as national unemployment has started to rise.
"To risk increasing unemployment in the construction sector just makes no sense," he said.
"Thankfully, employment in real estate services and construction is up 16.5 per cent and 2.8 per cent respectively over the past year.
"The Australian economy needs this trend to continue, not go backwards due to unnecessary regulatory supervision constraining the construction industry."
Mr Russell's warning to APRA comes after he announced last month that new lending rules were unnecessary because dwelling values had already begun to slow.
[Related: Michael Russell shines light on succession plan]
Click here to read Mr Russell's full statement
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