Powered by MOMENTUM MEDIA
Powered by MOMENTUM MEDIA
subscribe to our newsletter
subscribe to our newsletter

APRA issues fresh warning on home lending

APRA chairman Wayne Byres has issued a fresh warning to Australian mortgage lenders.

Speaking at the Australian Business Economists Lunchtime Briefing in Sydney today, Mr Byres said that “there is no room for complacency” in the Australian banking system when it comes to home lending.

“The quality of lending for housing is too important not to be the subject to a great deal of scrutiny,” he said.

Advertisement
Advertisement

Commenting on bank mortgage portfolios, Mr Byres said that APRA’s primary concern has been that, in the face of ample credit and strong competition for new and existing customers for many years, there is the potential for "a slow but steady erosion of credit quality".

“Lower credit quality portfolios, of themselves, may not necessarily be worrisome if the strategy is a conscious one, the additional risk is appropriately priced and managed, and adequate capital is held,” he said. “That is really what much of our work has been designed to test.”

Mr Byres commented on the recent report by ASIC, released last week, which raised concerns about the growth in interest-only loans.

“This is not just because investors – who typically make greater use of interest-only loans – are a larger share of lending; investors have been increasing their use of interest-only lending,” he said. “So have owner-occupiers.

“There are many reasons offered for why this might be, but the increasing prevalence of interest-only lending does reduce the committed build-up of borrowers’ equity buffers that principal-and interest loans naturally provide.”

Mr Byres said that Australians have, thus far, not been taking advantage of record low interest rates to fix the rates on their borrowings.

“Obviously the sensitivity of borrowers to any increase in interest rates in the future will be a function of the extent to which they have maintained variable rate loans,” he said.

“At least thus far, there is little evidence that this sensitivity is being reduced.”

The APRA boss said that there is reason to conclude that housing portfolio risk profiles might have increased, and underwriting standards softened, over time.

APRA issues fresh warning on home lending
mortgagebusiness

Latest News

Mortgage holders will be breathing a “sigh of relief” following the federal government’s announcement of a new $130-billion support p...

The regulatory approach to the RBA’s recently announced term funding facility, which aims to incentivise lenders to continue to supply bus...

The federal government has committed an additional $130 billion in support to protect jobs threatened by the economic fallout from the cor...

FROM THE WEB
podcast

LATEST PODCAST: Further relief for SMEs and borrowers

Do you think Australia will move to quantitative easing this year?

Why we’ll keep delivering for our communities in the face of COVID-19

alex

As Australia tries to keep pace with a rapidly changing business and social landscape in the wake of COVID-19, Momentum Media is leading the way delivering essential content to our communities, writes Alex Whitlock, director of Mortgage Business.

Read more

Website Notifications

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