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APRA mortgage curbs may not be the best answer: Westpac

Westpac CEO Brian Hartzer has questioned regulatory intervention that is seeing both ASIC and APRA become increasingly “prescriptive” about how the bank sets its credit policy.

When the issue of responsible lending was raised at a parliamentary inquiry in Canberra this week, one MP explained how many older Australians are unable to refinance as a result of stricter credit policies.

Westpac CEO Brian Hartzer, who faced the the House of Representatives economics standing committee on Wednesday, said responsible lending needs to be taken on a “case-by-case basis”.

Mr Hartzer told the committee that the life of a home loan is more like seven years, rather than 30, and that the regulators are becoming “much more prescriptive about how we run our credit policy”.


“In the end, the regulators have the right to set the rules and we have to follow those rules and we do,” he said.

The Westpac boss went on to explain how the bank’s interactions with regulators cover many topics and can range from casual discussions to formal letters.

“There are a series of ongoing discussions and clarifications and guidance that range from formal notification of guidance form ASIC to informal conversations from APRA to formal letters form APRA saying you will do X,” he said.

“My observation is that they are becoming much more prescriptive. We are not so sure that’s the best answer.”

Meanwhile, Mr Hartzer dismissed fears of a property bubble, explaining what he believes a bubble would look like and why the housing market is not at that stage.

“We would draw the distinction between a speculative bubble in prices and prices that are beyond what the fundamentals would justify,” he said.

The reason why I draw that distinction is because what we have seen in other markets from time to time is people get the view that house prices only ever go up, and they start borrowing money to buy a house with the view that they will sell it again in a year and buy a bigger house.

“That to me is the definition of a bubble, a credit-fuelled speculative bubble. I don’t think that’s what is happening in Sydney or Melbourne. I think what we are seeing in Sydney and Melbourne is the consequence of severe supply constraints running into a significant step-up in demand, albeit that’s now attenuating a little bit, from offshore buyers.”

[Related: Westpac explains position on apartments, foreign buyers]

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