Powered by MOMENTUM MEDIA

RBA confirms focus on lending standards as prices soar

By Maja Garaca Djurdjevic 20 April 2021 | 1 minute read

The RBA has restated its intention to monitor trends in housing borrowing and the maintenance of lending standards “carefully”.

The RBA has restated its intention to monitor trends in housing borrowing and the maintenance of lending standards “carefully”.

Noting a significant boost in housing prices in recent months, the Reserve Bank of Australia reiterated its focus on lending standards, but stopped short of dropping any hints at macro-prudential measures to contain the potential risks to financial stability.

In fact, the RBA acknowledged at its last monetary policy board meeting that while Australia has experienced growth in housing credit and housing prices, these have been “more modest” than in a number of other countries, including New Zealand where the government recently stepped in with regulatory action.

“Annualised growth in housing credit had been around 4½ per cent over the six months to February, driven by demand from owner-occupiers. Demand for new housing finance had been strong, and the high level of loan commitments indicated that housing credit growth was likely to increase in the months ahead,” the RBA said.

“However, there was no notable evidence of a deterioration in housing lending standards,” it underlined.

Advertisement
Advertisement

And while the share of loans with higher loan-to-valuation ratios has increased, this, the RBA said, was in part explained by the larger share of first home buyers.

“The share of loans with high debt-to-income ratios had been relatively stable.

“Members agreed that it would be important to watch carefully for increased risk-taking by lenders and any deterioration in lending standards and larger shares of higher-risk loans,” the bank reiterated.

In discussing house price growth, the RBA acknowledged the expansion of the growth to include the largest capital cities and the more expensive segments of these markets, but underlined their modesty.

Last week, the CEOs of all big four banks expressed their dislike of macro-prudential policies, with most arguing that limiting lending would disproportionately impact first home buyers.

Speaking before the house economics committee, CBA boss Matt Comyn noted that the bank is “not overly concerned with what we are seeing at the moment in the context of broader financial stability”.

And although he did warn his fellow bankers and regulators to watch price movements closely, ANZ boss Shayne Elliott opined that there is no cause for alarm.

“We agree that price increases need to be watched and credit standards maintained to ensure the financial system remains stable,” he told the committee on Friday.

About the author

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic

Maja Garaca Djurdjevic is the editor of nestegg and Smart Property Investment. Email Maja at Read more

RBA confirms focus on lending standards as prices soar
The RBA has restated its intention to monitor trends in housing borrowing and the maintenance of lending standards “carefully”.
spi logo

Get the latest news & updates

Join a community of over 100,000 property investors.

Check this box to receive podcast updates

From the web

Recommended by Spike Native Network

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.