The Reserve Bank could further curb mortgage lending to investors as the impact of earlier measures wanes...
(Bloomberg) -- Australia could further curb mortgage lending to investors as the impact of earlier measures wanes and Sydney and Melbourne house prices keep surging, Reserve Bank Assistant Governor Michele Bullock said.
“There is no doubt that the actions did address some of the risks,” she said in a Bloomberg Address in Sydney. “While the resilience of both borrowers and lenders has no doubt improved, the initial effects on credit and some other indicators we use to assess risk may fade over time. We are continuing to monitor their ongoing effects and are prepared to do more if needed.”
Bullock, in her first speech since taking up oversight of the financial system, stressed that while individual decisions by banks may appear reasonable, regulators’ concern is that together they could lower overall lending standards. The backdrop is one where Sydney house prices have rocketed 105 percent since the start of 2009 and Melbourne’s have also soared.
Bullock’s comments Tuesday also come as Australia’s economic community splinters on what the RBA will do next. A record-low cash rate of 1.5 percent -- designed to support the economy’s transition to services-driven growth from mining -- is fueling the east coast housing boom and a borrowing binge that’s sent the household debt-to-income ratio to a record 187 percent.
Low Rates
Along with flagging possible new macroprudential measures, Bullock also touched on rates. “There is also some thinking to be done about how monetary policy considerations should factor in financial stability issues, and the role that macroprudential policies might play in addressing system-wide risks in a low interest rate environment,” she said.
Citigroup Inc. banking analysts say regulators may consider introducing tighter debt service caps, higher buffers on serviceability rates or strengthening income criteria.
Bullock’s comments “that more measures could be deployed to address financial stability risks should not be surprising given the continued rise in household debt to new record levels, the unrelenting brisk pace of house price rises in Sydney and Melbourne and the renewed strength of investor lending,” Citi analysts said in a report following Tuesday’s speech.
TODAY: Non-Major Banks roundtable, live on MPAJoin the broker channel heads of Adelaide Bank, AMP, Bank of Queensland, ME (bank) and Suncorp on Wednesday lunchtime as they discuss the big issues facing the market right now. Topics include ASIC's Remuneration Review, turnaround time blowouts, interest rates and investor lending. Go to http://www.mpamagazine.com.au/tv/
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