Government signals new loan restrictions to stop fleeing market
It was only a matter of time, but Canberra gave the green light for intervention in the Australian loan market after 12 months of record price growth.
Australian property buyers looking to get the most out of it will soon be turned away by lenders, as Treasurer Josh Frydenberg signals tighter regulations.
âWe need to be careful about the balance between credit growth and income to avoid the build-up of future risks in the financial system,â said Frydenberg. The Australian Financial Review.
âSometimes carefully targeted and timely adjustments are needed. “
Of particular concern is the growing number of borrowers taking out loans over six times their income. According to the most recent data, around 22% of all borrowers are now above this key risk measure, as homebuyers and investors try to keep pace with soaring prices.
The Board of Financial Regulators (CFR), which includes the Reserve Bank (RBA), APRA, Treasury and ASIC, is expected to look specifically at this measure, limiting the borrowing power of new applicants. loan.
The action would most likely lock out investors before locking out homebuyers, given the tendency for early adopters to own multiple properties.
Frydenberg noted that a “positive feature” of the current boom was that it had been driven by homebuyers rather than investors, but added that regulators were considering a “range of tools” to maintain housing standards. ready.
While the ultimate responsibility rests with APRA to implement new credit restrictions, the RBA has grown in concern in recent months as record interest rates have allowed house prices to rise in boom, simultaneously increasing household debt and financial risks.
Although they are the biggest beneficiaries of a strong market, the big banks have also sounded the alarm bells. Commonwealth Bank CEO Matt Comyn said last week action must be taken “as soon as possible” with the nation’s largest bank increasing its credit buffer on its own for future rate hikes of interest.
ANZ Bank CEO Shayne Elliott also told policymakers he has started turning down high-risk borrowers, saying risk management has now become more important than market share.
At an annual rate of 7% per annum, credit growth has exceeded wage growth by more than two – the number one priority for the central bank.
While AFR reports that no timetable has been set, Frydenberg’s comments pave the way for further restrictions in the weeks and months to come.
It remains to be seen whether this will be enough to slow price growth – a by-product, and not the goal of stricter lending standards.