The regulator is preparing a strategy to potentially clamp down on the runaway housing market
The Australian Prudential Regulation Authority is preparing a raft of measures to cool the red-hot housing market and reduce the risks associated with the growing number of borrowers taking on high-debt mortgages.
Minutes from last week’s quarterly meeting of the Council of Financial Regulators revealed that members discussed “possible macroprudential policy responses.” At the meeting, APRA was tasked with constructing a framework of potential regulatory measures, according to The Australian.
The CFR is chaired by Reserve Bank governor Philip Lowe and includes senior officials from APRA, the Australian Securities and Investments Commission, the Australian Competition & Consumer Commission and the Treasury. According to the minutes, members were “mindful that a period of credit growth materially outpacing growth in household income would add to the medium-term risks facing the economy, notwithstanding that lending standards remain sound.”
Treasurer Josh Frydenberg said Wednesday that regulators continued to “deliberate” on what lending rules might be imposed, but said that any regulatory intervention would not impact the vast majority of future borrowers, The Australian reported.
“What we do know is that the investors or the first-home buyers, or others who may be affected by this, will be a very small proportion of the overall market,” Frydenberg said.
Officials have hinted that the climbing number of mortgages made at more than six times the borrower’s income will be the focus of any regulatory intervention, according to The Australian. In the June quarter, just under 22% of new mortgages were at debt-to-income ratios above six, up from only 16% the year before. About $34.2 billion in loans written over the quarter were to customers borrowing more than six times their income.
Read more: Frydenberg gives nod for regulators to curb housing boom
The minutes from the CFR meeting also noted that “recent lockdowns have reduced transactions and new listings, but prices are still rising briskly in most markets.” The minutes also stated that “commitments for new housing loans remain at a high level, suggesting that credit growth is likely to remain relatively strong. Against this background, the council discussed possible macroprudential policy responses.”
The minutes said that over the next couple of months, APRA will publish an information paper on its framework for implementing macroprudential measures, The Australian reported.
Frydenberg said Wednesday that acting now to stem potential risks in the property market “means less is required later.”
“Historically low rates are fuelling higher house prices, and what has been pleasing to see is that owner-occupiers and first-home buyers have been coming into the market in greater numbers than we have seen in previous cycles,” he said. “We’ve also got to be conscious of the balance between credit growth and income growth, and … of future risks building up in the system. That is why APRA is looking very closely, the RBA is looking very closely, at what particular levers they have at their disposal to ensure we maintain stability in our housing market.”
