Powered by MOMENTUM MEDIA
subscribe to our newsletter

APRA warns of housing market risks

Australia’s prudential banking regulator has said it may be forced to act after warning of “heightened levels of risk” in the housing market.

APRA told the federal Inquiry into Home Ownership that while Australia’s banking and housing system has historically been solid, risks have emerged and things can change quickly.

Australia’s share of non-performing housing loans has been extremely low by international standards since the Reserve Bank of Australia began collecting data nearly 20 years ago, according to APRA’s submission.

“However, in APRA’s view, the current economic environment for housing lenders is characterised by heightened levels of risk, reflecting the combination of historically low interest rates, high household debt, subdued income growth, unemployment that has drifted higher, significant house price growth and strong competitive pressures,” it said.

“Moreover, recent experience from around the world shows that it is unwise to be complacent about imbalances that can build in the housing sector.”

Advertisement
Advertisement

APRA said that it has “sought to turn up the dial of supervisory scrutiny” on Australia’s banks, which have had to demonstrate what they are doing to manage their risk profiles.

The larger banks have been given specific feedback on areas that need strengthened policies or practices, according to APRA.

The regulator added that it is in the process of writing to individual banks to confirm agreed plans and revised polices and, where necessary, timetables for action.

APRA said that while it is too early to be certain, the early evidence suggests it has had some success in moderating the behaviour of banks pursuing higher-risk strategies.

Another positive sign is that the growth in investor lending may now have stopped, according to APRA. Investor loans generally carry more risk than owner-occupied loans.

PROMOTED CONTENT


APRA said it will monitor the impact of its current initiatives and would consider taking further measures to ensure that emerging risks are contained.

Such measures could include tightening lending standards, setting limits on particular types of higher-risk lending and forcing more aggressive banks to hold more capital, APRA said.

APRA also said it is “likely to act sooner rather than later” on the recommendation of the 2014 Financial System Inquiry to raise capital requirements for housing loans held by the largest banks.

APRA warns of housing market risks
mortgagebusiness

Latest News

Preliminary ABS data has revealed that the value of residential construction work done has declined in the September quarter to its lowest l...

Westpac and its subsidiaries have reduced its owner-occupied and investment property fixed home loan rates, effective 24 November. ...

Defence Bank has appointed two new board directors and announced the retirement of long-term director Lieutenant Colonel Craig Madden. ...

FROM THE WEB

Join a group of highly informed brokers.

Broker Pulse, a community-driven knowledge base of lender performance Reveal exactly which lenders are making life easiest for brokers and their clients by taking this monthly survey and joining a group of highly informed brokers who leverage these insights every month.

JOIN NOW
podcast

LATEST PODCAST: Responsible Lending - what could lie ahead for lenders, brokers and borrowers?

Do you expect to see strong uptake of the HomeBuilder scheme?

Website Notifications

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