Mortgage lending rules in Australia are unlikely to change in the near term despite rapidly rising home values, according to a recent CoreLogic analysis.
According to the research firm’s latest Property Pulse report, recent data from the Australian Prudential Regulation Authority (APRA) suggested that, while the proportion of loan originations that could be “higher risk” showed a slight increase through the December quarter, the regulator saw no evidence of a “material relaxation in lending standards.”
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“Indicators of lending standards are being watched carefully,” said Eliza Owen, head of research, Australia, at CoreLogic. “Borrowing for the purchase of residential property hit a record $28 .8 billion in January 2021, up 34.8% from the decade average. This has also contributed to housing values reaching a new record high. So far, however, the December 2020 quarter has not shown any major deterioration in lending standards, suggesting there is no need for interventions in the form of tighter credit policies.”
Owen warned, however, that if the trend towards “riskier” styles of lending continues, or indeed accelerates, it “becomes more likely we will see regulatory intervention aimed at curbing financial stability risks related to the housing sector.”
CoreLogic’s assessment echoed recent statements from Philip Lowe, governor of the Reserve Bank of Australia, who committed to a strategy of maintaining a low cash rate despite rising prices in the property market.
“As part of this focus, we are continuing to pay close attention to lending standards, especially given the combination of low interest rates and rising housing prices,” Lowe said at a business forum last week. “Looser standards would increase medium-term risks and add to the upward pressure on prices, so would be of concern… we are not at this point, but we are watching carefully.”