The competitiveness in the mortgage sector is stretching lending standards, according to Australia’s financial regulator.
The Australian Prudential Regulation Authority has just completed a stress test on the on the banks focusing on a significant downturn in the housing market. New chairman Wayne Byres reported to a Senate committee yesterday that APRA may have to make some adjustments to ensure that lending falls within acceptable limits.
"We've just completed a comprehensive stress test of the largest lenders, which was focused amongst other things on a significant housing downturn. I don't think there's any issue that it is a competitive marketplace. Lending standards are being stretched," Byres told the committee, according to a Fairfax report.
But Fairfax reported that CBA
chief Ian Narev has argued that limiting LVRs was not an appropriate response to keeping a surging housing market under control. Narev argued that the average LVR at CBA
was 48%. He said Australia's full recourse arrangement on home loans could also mitigate risk, Fairfax reported.
"This idea that if property prices dip 10 per cent suddenly everything is underwater and even if it is people will walk away from houses isn't right. The key question is can people service the debt. And the key question there is do they have a job. The number one thing we look is the trend on the unemployment rate."