Is there going to be a crackdown on house loan lending?

"Carefully targeted and timely changes" may be required to avoid turbulent seas, according to the federal treasurer, who has given the strongest hint yet that a house loan crackdown is on the way. So, what might a possible crackdown on lending look like?

Lately, lending rules and skyrocketing house prices have been major subjects.

The average Australian property has increased in value by more than 18 percent in the last year, the fastest annual rate of growth since the late 1980s, and interest rates are at all-time lows.

It’s a combination that’s causing some financial regulators to be concerned that some homebuyers are overextending themselves and taking on more debt than they can comfortably handle.

So, to address the health of the housing market, federal treasurer Josh Frydenberg recently convened with the Council of Financial Regulators, which includes APRA, ASIC, the Australian Treasury, and the Reserve Bank of Australia.

Mr Frydenberg said in a statement, “We must be careful of the balance between credit and income growth to prevent the build-up of future vulnerabilities in the financial system.”

“There are a variety of methods available to APRA to attain this result, including carefully targeted and timely changes.”

What could be the consequences of such a retaliation?

According to the most recent data from the Australian Prudential Regulation Authority (APRA), about 22% of Australians have a mortgage debt that is more than six times their annual income.

This is a significant increase above the previous year’s 16%.

APRA’s use of that statistic offers us a good idea of what one likely lending crackdown metric would be. 

According to the ABC, “most analysts expect APRA to target debt-to-income ratios this time, probably by capping the share of loans that may be made over six times an applicant’s household income.” 

It’s also worth noting that Mr Frydenberg and the Australian Prudential Regulation Authority (APRA) aren’t the only ones who have expressed alarm about rising property prices and debt just a few days ago.

According to RBA associate governor Michele Bullock, “even if banks have healthy balance sheets and lending criteria are being maintained, there is a risk that in this environment, households may become progressively indebted.”

To put it another way, if household earnings or housing values drop dramatically, a high amount of debt might put the economy at danger. We are always evaluating whether or not there is a need to use macro-prudential tools to manage these concerns.”

Do you want to know how a possible crackdown on lending would affect you?

It’s worth noting that there’s still a lot of speculation about what financial regulators are thinking about any possible loan crackdowns.

We can, however, assist you in determining your possible debt-to-income ratio for any property acquisition you may be considering. In the current financing environment, we can also assist you in determining your borrowing ability.

So get in touch today if you’d want to learn more. We’d be delighted to go through everything in greater detail with you, depending on your specific needs.

To learn more, contact Premium Finance Group Australia at (07) 4720 8888 or email us at finance@pfga.com.au


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