A high-level Reserve Bank of Australia (RBA) official believes tighter regulations have had a positive impact on the behaviour of Australia’s lenders.
Speaking at the Australian Property Institute's Queensland Property Conference last week, RBA assistant governor Malcolm Edey said while lending standards among Australian institutions had improved post-Global Financial Crisis (GFC), there had been some deterioration recently.
“As a general proposition, mortgage lending standards in the post-crisis period have been relatively tight, at least more so than before the crisis,” Edey said.
“Nonetheless, investigations by APRA and ASIC have shown that there was some slipping in lending standards and that they were inadequate in some important respects to the current risk environment.”
In particular, Edey nominated lenders taking an over-optimistic view of borrowers’ serviceability, not accurately calculating the living expenses of borrowers and failing to take future rate rises into consideration as areas where standards had fallen.
But Edey said moves by lenders, including responses to APRA-led changes to serviceability and investor lending practices as well as banks raising interest rates in response to updated capital requirements are going some way to correcting the lax standards.
“It will take time for the full impact of these measures, and of the more recently announced increases in bank lending rates, to become apparent,” Edey said.
“Nonetheless, the indications to date are that the supervisory measures are having a beneficial effect on lending standards and are assisting in restraining new investor finance.”
Edey’s observations came in the same week that RBA deputy governor Philip Lowe criticised lenders for poor reporting practices that led to $50 billion in mortgages being reclassified from owner-occupied loans to investor loans
Can you afford to buy in this suburb? Find out how much you can borrow
Top Suburbs :
tweed heads south
Get help financing your investment
Do you need help finding the right loan for your investment?
When investing in property, it is important to make sure that you not only have the lowest available rate that you can get, but also have the correct loan features for your needs.
Just fill in a few details below and we'll then arrange for a local expert Aussie Mortgage Broker to contact you and work out what features or types of loans are right for your needs. We'll even help with the paperwork. Plus, our mortgage broking service is at no cost to you.
We value your privacy and treat all your information seriously - you can check out