Australian housing borrowing booms, regulators ready new lending rules

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SYDNEY (Businesshala) – Australian home debt in August expanded at its fastest annual pace since the beginning of 2018 as buyers borrowed more to get into the red-hot market, bucking tough regulations from regulators related to rising risks to financial stability. put away.

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Reserve Bank of Australia (RBA) data on Thursday showed outstanding home loans in August rose 0.6% from July, pushing the annual growth to 6.2%. This was the biggest annual increase since February 2018 and double the pace seen a year earlier.

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Record-low mortgage rates have fueled an increase in debt, which in turn has driven up home prices.

According to property advisor CoreLogic, the annual price increase increased by 18.4% in August, the fastest pace since July 1989 and a profit of $1,990 ($1,444) per week for the average asset.

With prices rising far faster than income, policymakers worry that borrowers are taking on ever larger amounts of debt, leaving them vulnerable to an economic slowdown.

Annual growth in new home loans reached 68% in July and loans for investment properties nearly doubled from a year ago, raising alarm bells among regulators.

Even the IMF and OECD have recommended tightening macroprudential rules to limit the market’s worst excesses.

The Australian Prudential Regulation Authority (APRA) indicated on Wednesday that it would issue an information sheet on macroprudential policy in the next few months, letting banks know that toughness is close.

The Reserve Bank of Australia’s (RBA) head of financial stability, Michelle Bullock, recently flagged potential instruments, including servicing and interest rate buffers, debt to income ratios and limits on the debt-to-value ratio.

The central bank has categorically rejected calls to raise interest rates to cool the housing market, arguing that house prices were not a target of monetary policy and any increase would only slow the economy and people will be thrown out of jobs.

“Given the weakness and uncertainty in the rest of the economy, raising interest rates is unlikely, and crashing the economy to get more affordable housing won’t help anyone,” says Shane Oliver, head of economics at AMP Capital.

He said that macroprudential policies had previously worked to control the market, although they were a short-term solution to a problem that required a long-term solution.

These included easing the construction of new homes and tax reforms that supported speculation in housing, although these often faced high political hurdles.

($1 = 1.3778 Australian Dollar)

Reporting by Wayne Cole; Editing by Christopher Cushing and Lincoln Feast.

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