Warning sounded as mortgage crackdown to cool ‘risky’ housing market draws closer

First-time homebuyers are seriously concerned as regulators reflect on how to crack down on risky mortgages in the booming housing market.

Financial regulators examining what can be done to crack down on Australia’s “risky” real estate market are urged not to “trample” on first-time home buyers and smaller banks.

The Board of Financial Regulators – made up of the Australian Prudential Regulation Authority, the Reserve Bank, the Australian Securities and Investments Commission and the Treasury – met on Friday, with Treasurer Josh Frydenberg appearing to discuss the risks of the estate market.

Housing credit conditions and limiting the risks associated with historically low interest rates, growing demand and soaring house prices were an important part of the dialogue.

It comes as new figures reveal that up to 20% of homebuyers borrow more than six times their income.

In the June quarter, the number of new residential mortgages with debt at least six times greater than income jumped to 21.9% from 16% in the same quarter last year.

Regulators have been given the green light from Mr Frydenberg consider “macroprudential policies” – such as putting limits on certain types of loans or tightening income-to-loan ratios – to restrict high-debt mortgages and minimize risk.

Mr Frydenberg said earlier this week that there must be a “conscious balance” between credit growth and income “to prevent the build-up of future risks in the financial system.”

“There is a range of tools available to APRA to achieve this result,” he said.

In its quarterly statement, the CFR said APRA would continue to consult with it on the implementation of any specific measures.

“Over the next two months, APRA also plans to publish a background paper on its macroprudential policy implementation framework,” the statement said.

While no decision on what the measures might look like has been confirmed, the Customer Owned Banking Association urges regulators to “carefully target a clearly identified problem so that they do not disadvantage smaller banks and early adopters of money. House”.

Managing Director Michael Lawrence said there should be “adequate consultation” before any intervention, in order to “reduce the risk of unintended consequences on small banks from any macroprudential action”.

“We also note the treasurer’s comments that” carefully targeted and timely adjustments are sometimes required, “” said Mr. Lawrence.

“However, the Treasurer also noted that” a positive feature of this housing cycle compared to the last is a higher proportion of first-time buyers and owner-occupants entering the market. ”

“Our industry’s focus on homeowners and first-time homebuyers is exemplified by our higher share of the loan-to-value ratio (LVR) loan system to homeowners as a percentage of new loans, and by the 20 lenders in our industry on the Panel of the premier home loan deposit system.

“Our industry’s cautious approach is underscored by the bad debt ratio, where we track about a third of the system rate.

“We look forward to the next APRA briefing paper outlining APRA’s framework for the use of macroprudential policy tools. “

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