• 23/06/2024

The reason why we are talking about a lender crackdown is to avoid actually having a lender crackdown

This week, a number of finance regulators said they were turning their mind to enforcing robust lending standards.

Straight after, CBA announced it was adopting a more conservative stance in its lending policy.

Accredited Broker believes these changes are more apparent than real and that the real purpose was to make borrowers realise that easy lending at ultra-low rates cant go on forever.

While the Reserve Bank does not target house prices, Governor Philip Lowe has said that regulators have started discussing possible responses to a run-up in household debt.

Those responses could include increasing required loan-to-value ratios on mortgages or directing banks to reduce their exposure to mortgages for investors.

Sydney’s median house value has climbed more than 15 per cent through the first 5 months of the year to $1.2 million while in Melbourne the median price is now at $908,000.

But, research from Corelogic indicates that the property market is not going as gangbusters as the media would lead us to believe:

  • the portion of those riskier loans with a loan-to-valuation ratio of greater than or equal to 90% actually fell – from 11.3 per cent to 10.4 per cent
  • and, while the portion of lending on interest only terms ticked up 10 basis points recently, it remains well below the 46 per cent peak in 2015. 

As Governor Lowe said, “We’re not at the point where we’re actively considering implementing any initiatives in this area, but we’re doing the preparation for what might happen, what we might do if credit growth was accelerating.”

As a result, the Australian Prudential Regulation Authority (APRA) has written to the largest banks to seek assurances that they are proactively managing risks within their housing loan portfolios, and will maintain a strong focus on lending standards and lenders’ risk appetites,”.

Accredited Broker believes regulators are preparing Australians for the days when getting finances will be harder in the hope that this will rein in any temptations to borrow beyond their means.

Some analysts believe that, despite the rapid rise in house prices, the regulator is unlikely to step in to curb lending for the next two years.

Investment bank CLSA has said “Our analysis reveals that macro-prudential fears are premature; we do not expect meaningful restrictions to be introduced in the next 12 to 24 months.”

When APRA first intervened in December 2014, the share of investment lending was around 40 per cent. The regulator then moved to set a 10 per cent limit on the annual growth in banks’ housing investor loan portfolios.

“The numbers do not stack up; it’s well away from the trigger of the last round of macro-prudential policy.”

Accredited Broker concurs, anecdotally, we are aware that many banks remain as cautious as ever as to how much they will lend – and the recent words from the RBA and APRA will be enough to ensure nobody gets over-excited.

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