- RBA has kept policy settings conducive to property price growth, but headwinds could be on the horizon
- One of those headwinds is tighter credit conditions, according to CoreLogic’s Eliza Owen
- “In a market that could well be a bubble, APRA must be thinking about putting new controls on bank lending standards,” Canstar’s Steve Mickenbecker says
- In a Finder survey of 31 economists and property experts, 55 per cent expect APRA to implement lending restrictions to dampen property price growth
The RBA has maintained its current monetary policy settings today, with the cash rate goal continuing at 0.1 per cent, a level that has pushed mortgage rates lower and helped push up house prices.
The latest report from CoreLogic showed home values have risen 20.3 per cent over the year, the fastest annual growth since 1989.
While the monetary policy may continue to promote gains in house values, there are certain obstacles to future housing market expansion, according to CoreLogic head of research Eliza Owen, with one of the headwinds being tighter credit conditions.
“In recent months, the RBA has reiterated that house prices are not an area of direct responsibility for the RBA,” she said.
“However, there is mounting expectation that the housing lending space could see some macro prudential intervention.
“In its statement today, the RBA made direct reference to the importance of appropriate loan serviceability buffers in the current environment.”
The Australian Prudential Regulation Authority (APRA) is currently weighing up options it could take to curb riskier borrowing, options that could include limiting how much buyers can borrow from banks.
APRA data on quarterly property exposures suggests that around 22 per cent of new mortgage lending has a debt-to-income ratio of six or more, which Ms Owen said might become a focus for more prudent lending conditions.
Canstar group executive of financial services Steve Mickenbecker said the Reserve Bank Governor Phillip Lowe had made it clear that it wouldn’t be swayed to cut the cash rate to cool the property market, but it would instead put pressure on the Government and APRA.
“With markets booming, we continue to see competitive new lows in interest rates as lenders chase share, and two larger banks even reduced their interest only lending rates in recent weeks,” he said.
“In a market that could well be a bubble, APRA must be thinking about putting new controls on bank lending standards.
“Regulators may consider a mix of controls on investment lending, repayment types, serviceability requirements and high debt in income ratios. If that is what is ahead, first home buyers, already finding the property market a difficult place, will have to somehow be quarantined from the impact.”
In a Finder survey of 31 economists and property experts, 55 per cent expect APRA to implement lending restrictions to dampen property price growth.