Regulators said that tighter mortgage rules will do little in curbing the booming property market
As said by The Guardian, Australia’s property market is booming and stricter standards on mortgage lending rules are expected to do little to curb the surging house prices.
Renée Roberts, executive director of policy at the Australian Prudential Regulation Authority (Apra), said that stricter standards on households’ ability to pay back loans will have only a “fairly modest” impact on prices.
Home prices have increased tremendously throughout this year, with increases of 22 percent foreseen by the end of 2021.
However, they’re tipped to flatten as markets expect the interest rate to rise sooner than the guidance of 2024 provided by the Reserve Bank of Australia (RBA).
According to CoreLogic, Australia’s housing auction market saw its second busiest week of the year with 3,562 homes, an 8.2 percent jump from the previous week.
Clearance rates have also dropped due to higher supply, with 75.5 percent of sales successful.
In October, Apra informed mortgage lenders to ensure that borrowers could continue to repay their current interest rate with a buffer of 3 percent for further increases.
On November 15th, Roberts told the lower house standing committee on tax and revenue that Apra is more concerned with financial stability and ensuring mortgage repayments.
Apra’s general manager of policy Gideon Holland said Australia’s financial system could withstand lower house prices if borrowers stayed in work and were able to service their loans.
Luci Ellis, assistant governor at RBA, said she accepts that low interest rates have contributed to housing prices, but low rates and inflation were preferable to higher inflation, which could have obstructed investment.
The RBA has kept interest rates at a record 0.1 percent and won’t raise them until inflation is “sustainably” within its two to three percent target range.
Yet, borrowers are rushing to lock in such rates amid news that the record low cash rate will come to an end earlier than its current prediction of 2024.
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