If rates increase, "then maybe there's actually no more work for us to do," APRA boss says
The Australian Prudential Regulation Authority says it is willing to ease recent lending restrictions if interest rates start to rise.
“If we went into an environment where interest rates started to increase, then maybe there’s actually no more work for us to do,” APRA chairman Wayne Byres told The Australian. “[That’s because] there will be a natural increase in interest rates which will, by itself, start to slow down very high levels of new loans that are flowing through the system at present. But if that wasn’t to be the case and credit growth continued to accelerate and household debt levels continued to rise, then maybe there would be a trigger for more action on our part.”
Earlier this month, the Reserve Bank flagged an earlier-than-expected hike in the cash rate after a spike in inflation for the September quarter, The Australian reported.
In October, APRA stepped in to cool the red-hot housing market by raising the interest-rate buffer it expects banks to use when assessing the ability of borrowers to repay their mortgages. The regulator told banks to assess home-loan serviceability at an interest rate at least three percentage points above the loan product rate. APRA has also said it could intervene again if the housing boom doesn’t moderate.
Data released this month showed that house prices have spiked 20% over the past year – the fastest rate since 1989, The Australian reported. Analysts have projected further increases in 2022.
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On Monday, RBA assistant governor Luci Ellis said that booming house prices were being spurred by record-low interest rates and having a negative impact on first-home buyers. Speaking at a parliamentary hearing, Ellis said homeownership was being influenced by inheritance and that “people whose parents rented are going to be in a much more difficult situation to actually get into housing.”
In a speech to the annual UBS conference on Monday, Byers said that a new bank capital framework to be released in the next few weeks would raise minimum requirements in line with APRA’s “unquestionably strong” 2017 benchmark, as well as improve risk sensitivity and transparency, The Australian reported. Byres said that the framework was one of three important papers due before the end of the year, including last week’s macroprudential framework and a policy of resolution of stressed banks.
