Australian Banking Regulator Sees Slowdown in Investor MortgagesNarayanan Somasundaram
The Australian banking regulator expects to see slower growth in investor mortgages that have helped drive a housing boom in Sydney and Melbourne and warned it will continue to monitor lending standards.
Banks have had long enough to “revise their ambitions” and the Australian Prudential Regulation Authority will “be watching carefully to see a moderation in growth in investor lending in the second half of the year,” Chairman Wayne Byres said in a speech in Sydney Wednesday. The regulator has agreed plans with banks and will be “monitoring closely to see that they kick into effect,” he said without giving further details.
Landlords have fueled a surge in house prices with Sydney homes now costing 40 percent more than they did three years ago. The central bank has warned speculative investor demand may amplify prices and increase the potential for a fall later, while APRA urged lenders in December to limit investor mortgage growth to 10 percent a year.
Australia & New Zealand Banking Group Ltd.’s Chief Executive Officer Mike Smith last week described investor mortgage growth as “toppish,” while his counterparts at Westpac Banking Corp. and National Australia Bank Ltd. said they were working to limit annual growth in such loans to 10 percent.
“Given the importance of housing-related lending, it should not be surprising that APRA supervisors are increasingly vigilant on the risks this lending presents,” Byres said, according to the text of his speech. “Put simply, if all our eggs are increasingly being placed in one basket, we need to make sure the basket isn’t dropped.”
Across all banks, the proportion of lending attributable to housing has increased over the past decade from 55 percent to just under 65 percent, Byres said.
Banks adopted different lending standards in a recent survey, in which the regulator asked them to assess four hypothetical borrowers, Byres said. The most generous bank was prepared to lend as much as 50 percent more than the most conservative bank, with the divergence caused by different assessments of living expenses, income sources and interest-rate buffers, he said.
Lenders with “more aggressive practices” should expect to find APRA “increasingly at their door step,” he said, adding the regulator will say more on capital requirements shortly.
Banks are likely to start “pricing the owner occupiers and investor segments differently,” according to Victor German, a Sydney-based analyst at CBA Institutional Equities.
Financial institutions will “review lending standards, loan-to-value ratios and overall become more conservative,” he said. “These measures should result in some moderation in investor- and ultimately overall-credit growth. While this is likely put a further drag on already anemic revenue growth, we don’t see it as a major negative either.”
To continue reading this article you must be a Bloomberg Professional Service Subscriber.
If you believe that you may have received this message in error please let us know.
- Morgan Stanley Says Stock Slide Was Appetizer for Real Deal
- U.S. Stocks Fall With Treasuries, Dollar Climbs: Markets Wrap
- U.S. Pays Up to Auction $179 Billion of Debt in a Span of Hours
- Florida Teachers’ Pension Fund Invested in Maker of School Massacre Gun
- ‘No Cash’ Signs Everywhere Has Sweden Worried It’s Gone Too Far