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

Regulators to investigate bank mortgage data

Next year APRA, the Reserve Bank and the Australian Bureau of Statistics will undertake a thorough review of the home loan data collected from Australian banks following the emergence of serious data issues that 'concerned' the central bank.

The Reserve Bank of Australia yesterday expressed serious concern over a number of data problems that have emerged as Australian lenders split investor loans from owner-occupied loans.

Speaking at the Finsia Regulators Panel in Sydney on Thursday, RBA deputy governor Philip Lowe said that recent problems with the data relating to banks' owner-occupier and investor housing loans have complicated the central bank’s understanding of what is going on in the housing market.

Advertisement
Advertisement

“These data problems have emerged as lenders have taken a closer look at their housing loans following increased supervisory scrutiny,” Mr Lowe said. “As lenders have looked more closely, what they have found has surprised and, to some extent, concerned us.”

Mr Lowe said the issue of inaccurate mortgage data was discussed at the most recent meeting of the Council of Financial Regulators, with Council members considering what steps could be taken to improve the quality of data.

“Among other things, it has been decided that APRA, the RBA and the Australian Bureau of Statistics will, next year, undertake a thorough review of the data collected from authorised deposit-taking institutions regarding their domestic books,” he said.

Mr Lowe pointed out two issues that had emerged since the regulatory crackdown on investor lending began earlier this year.

“The first is that over the past six months there have been very large upward revisions to the value of investor loans outstanding, with offsetting downward revisions to owner-occupier loans,” he said, noting that material revisions have been made by more than 10 institutions, including two of the largest lenders.

“The cumulative effect of the upward revisions has been to increase the stock of investor credit outstanding by around $50 billion, or 10 per cent. According to these new data, investor loans now account for 40 per cent of total housing loans outstanding, not the 35 per cent reported earlier in the year.”

While the reasons for some of these earlier errors have been identified, Mr Lowe said that in other cases the reasons are unclear and lenders have not been able to provide comprehensive back data.

“As a result,” he said, “when calculating growth rates for investor and owner-occupier credit, the RBA has had to make adjustments for what are effectively breaks in the series.”

Mr Lowe said the second data issue had emerged more recently, over the last few months, as lenders report that some loans that were previously recorded as investor loans were really loans to owner-occupiers.

“This is partly because, when faced with the higher interest rate on investor loans, some borrowers have indicated to their bank that they are not an investor, but rather an owner-occupier, and so should not have to pay the higher rate,” he said. “Our liaison with lenders suggests that further reclassifications of this nature could be expected over coming months.”

Taken at face value, the data suggest a very sharp slowing in growth in investor credit and a sharp pick-up in owner-occupier credit, Mr Lowe said. However, when adjustments are made for these reclassifications then the changes in growth rates are much less pronounced, he said.

“These various data problems have reinforced our view that the supervisory focus on investor lending has been entirely appropriate.

“And it is disappointing that some lenders' internal systems have not been up to the task of reporting accurate data on the split between investor and owner-occupied housing loans.”

 

Regulators to investigate bank mortgage data
mortgagebusiness

Latest News

Firstmac managing director Kim Cannon is “disappointed” that Treasury rejected the non-bank’s proposed acquisition of Maleny Credit Un...

Asset finance group Consolidated Operations Group has announced that it will “scale back” its equipment leasing but will continue its as...

Half of Australian businesses have already been hit by the economic fallout from the coronavirus outbreak, with approximately 86 per cent ex...

FROM THE WEB
podcast

LATEST PODCAST: The rush to save small businesses

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.