Association slams regulator squeeze on home lending

by Julia Corderoy11 Dec 2014
The Real Estate Institute of Australia (REIA) has slammed moves by the regulators to clamp down on home lending.

This week, APRA outlined specific areas of prudential concern which included higher risk mortgage lending, strong growth in lending to investors and loan affordability tests for new borrowers. ASIC also announced that it would begin an investigation into the provision of interest-only loans.

However, REIA CEO Amanda Lynch says that these attempts to introduce tighter controls on housing loans and targeting property investors are “totally unnecessary” and will adversely affect the entire market – not just the property hot spots.

“The trend for this latest quarter, as seen in our latest national snapshot of the sector released today, is a cooling off of the market nationally – even Sydney is coming off a high this quarter.

“You only have to look at the minutes of the Reserve Bank Board meetings to know that concerns about a rise in property prices relates primarily to Sydney and to a lesser extent Melbourne.

“In reality, this is the first step towards macro prudential tools and there is good reason why the sector resists any attempt to artificially control the market. We know from the New Zealand experience that moves such as these disproportionally affect first home buyers and APRA’s decision comes at a time when first home buyer levels in Australia have hit a record low.”

According to the Australian Bureau of Statistics, first home buyers stood at only 12% in the September quarter, well under the long term trend of 19%.  According to Lynch, any moves to tighten controls on home lending will make the situation worse.

“It was only last month that the Reserve Bank of New Zealand announced that it  would be winding back its macro-prudential measures after it became clear that it was shutting first home buyers out of the market.

“We need to learn from these overseas experiences and not jump to knee-jerk reactions.”
 

COMMENTS

  • by Paul Sheedy 11/12/2014 5:05:39 PM

    I think the move by ASIC demonstrates ignorance & naivety at an astounding level. In the UK, unless it has changed in recent years, all mortgage loans are Interest Only. Clearly ASIC has not heard of Offset a/c's, redraws or tax deductible lending compared with non tax deductible lending. Our default rate on Mortgages is still at incredibly low levels - even "Low Doc" loans have a very low default rate. Many clients are buying & selling properties & intelligently choose I/O repayments until one of the properties is sold. This new generation of borrowers have a thing called HECS to also repay, which previous generations did not have. Therefore it may be sensible to chose I/O for say 2-3 years until it is cleared. Don't forget they still have another 27-28 years in which to repay the loan. It was not that long ago that we had maximum terms of 20 & 25 years. I won't be taking my advice from ASIC or APRA anytime soon. Sheeds.