Australian regulators are closely monitoring mortgage boom-RBA
By Wayne Cole
SYDNEY, Sept. 22 (Reuters) – The boom in the Australian real estate market is leading to a build-up of consumer debt that could become a risk to financial stability, a major central banker warned on Wednesday, noting that the strength was positive for the economy as a whole.
In a speech on housing, Reserve Bank of Australia (RBA) deputy governor Michelle Bullock said regulators were closely monitoring bank lending standards and household debt as credit growth outpaced growth revenues.
“A high level of debt could pose risks to the economy in the event of a shock to household income or a sharp drop in house prices,” said Bullock, who heads the RBA’s financial systems division. .
“Whether or not it is necessary to consider macroprudential tools to deal with these risks is something that we are constantly evaluating. “
Regulators tightened lending rules in 2014 and 2017 to curb borrowing, especially for interest-only loans.
Bullock said that this time the risks came from borrowers with high debt, so the tools used should focus on servicing the debt and limits on how much can be borrowed.
She noted that investor activity in the housing market is currently far from levels it was in 2014, when Australia’s main banking regulator, APRA, introduced a benchmark for lending to investors.
Bullock played down concerns about the health of the banking system as a whole, noting that banks were heavily capitalized and there was no evidence that lending standards had been weakened.
The real estate boom had also helped the economy to recover.
“The strength of the housing market is positive for the economy and indeed constitutes an important channel for monetary policy to support the economy through housing construction, home renovations and the purchase of household items,” said Bullock said.
The real estate market has been hot this year amid record interest rates and strong demand for housing suitable for working from home.
Data from real estate consultant CoreLogic showed home prices rose more than 18% in August from a year earlier, the fastest pace since mid-1989.
The national statistician estimated that the total value of Australia’s 10.7 million homes rose from a record A $ 596 billion ($ 430.96 billion) in the June quarter, to reach 8.9 trillions of Australian dollars.
The push has been a boon for homeowners, but has also put housing beyond the reach of many first-time buyers and fueled concerns about affordability.
It was also built on a mountain of debt with new home loans reaching all-time highs in the first half of this year.
($ 1 = A $ 1.3839) (Reporting by Wayne Cole; Editing by Ana Nicolaci da Costa)