Modest impact of loan test change: APRA | Review of northern beaches

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The head of the banking watchdog expects his recent move to curb mortgage lending during a housing boom to have a modest impact.

Earlier this month, the Australian Prudential Regulation Authority increased the minimum interest buffer it expects banks to use to assess the usefulness of mortgage loan applications.

He wants banks to rate claims at a rate three percentage points higher than the offered interest rate product instead of 2.5 percentage points previously.

“It is too early to say precisely what impact this change will have on lending activity, given that banks have been urged to implement the buffer by the end of this month,” said the chairman of the ‘APRA, Wayne Byres, in a statement prepared for a Senate estimates hearing Thursday. .

“The overall impact on overall housing credit growth resulting from the change is expected to be quite modest.”

The move came amid rising house prices at their fastest pace in over 30 years and strong demand for mortgages, with more than one in five new loans approved in the June quarter. to more than six times the income of borrowers.

“With the bottlenecks lifted and expectations of a rebound in the economy, APRA considered that the balance of risks had shifted such that a rapid adjustment to service standards was warranted,” said M Byres.

Mr Byres reiterated that APRA’s action was not aimed at targeting the level of house prices.

“Rather, APRA’s goal is to ensure that mortgages are granted on a prudent basis and that borrowers are well equipped to service their debts in various scenarios,” he said. declared.

The audience was also told that the impact of climate change had impacted the insurance industry, but so far there was no evidence that this affected mortgage pricing.

However, Mr Byres said “the risk is there”.

He said much of Australia’s banking system was funded by offshore finance and more and more investors were prioritizing climate risk considerations much higher.

“We have seen increasing attention on the climate and in some extreme cases we have seen investors say they are unwilling to invest in certain counterparties,” he said.

“I would say the risk at this point is a potential concern, rather than a current concern, but it’s a real concern.”

Associated Australian Press


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