The regulator notes an increase in high debt-to-income lending, but says it's offset by "other metrics"
The Australian Prudential Regulation Authority has expressed concern about borrowers taking on increasing debt, but hasn’t yet said that policy measures would be required to cool off the red-hot housing market.
At a parliamentary committee on economics Friday, APRA Chairman Wayne Byres fielded questions about the booming housing market, The Australian reported.
“We are weighing up a raft of different considerations. There are risk metrics that tell us different things,” Byers said. “The issue of concern at present is that there is an increase in high debt-to-income lending, but it’s offset against a number of other metrics which are going in a more positive direction from a prudential perspective. Credit growth is picking up. In the most recent quarter, the risk metrics that we look at are sort of a mixed picture; interest-only loans have come down as a share of new lending, high-LVR loans have come down … offset balances are high and banks are not overriding policies to any serious degree.”
Byers said that banks’ balance sheets were still strong and that lending standards were being maintained, with no obvious “poor-quality” lending happening. He did say, however, that the situation was complicated by the ongoing lockdowns and negligible population growth, The Australian reported.
Worries about unsustainable house-price growth have been rekindled by signs that lockdowns may begin to lift next month in Sydney and Melbourne as vaccination rates approach key targets. A report by REA last week found that the volume of inquiries to real estate agents on realestate.com.au hit a record high in August. And while price growth slowed that month, a recent CoreLogic report revealed that residential property prices had risen nearly 11 times faster than wages over the past year.
Read next: Lending to heavily indebted borrowers on the rise – APRA
The CEOs of two of Australia’s major banks predicted last week that economic growth would recover strongly from a contraction in the September quarter, The Australian reported.
National Australia Bank chief executive Ross McEwan and Westpac head Peter King both expressed optimism about the economy to the committee. Both also urged caution when it came to implementing any regulatory measures to curb the housing market, saying the market should be assessed after COVID-19 restrictions were lifted before any action was taken.
Responding to the CEOs’ comments, Byres said, “Certainly we’re cautious of the current environment and the way it could play out. … The key issue at present that we’re watching is less prudential and more macro. It’s really looking at household debt levels and the extent to which there is potential for household debt levels to run well ahead of income growth for an extended period.”
