Invest
Central bank sounds warnings over further credit tightening
Australia’s banks could change and tighten their credit policies even further, as the aftershocks of the s interim report make their way through the banking sector.
Central bank sounds warnings over further credit tightening
Australia’s banks could change and tighten their credit policies even further, as the aftershocks of the s interim report make their way through the banking sector.
In minutes from its October board meeting, the Reserve Bank of Australia (RBA) said that despite moves from lenders to tighten lending policy in anticipation of the findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, it is “possible” that further tightening is introduced off the back of the release of the commission’s interim report.
The RBA acknowledged that lending standards had become “tighter than they had been a few years previously”, which it said “reflected the introduction of supervisory measures to help contain the build-up of risk in household balance sheets”.
“The [interim] report contains many questions covering a broad range of issues, but at this stage provides relatively little indication of the recommendations that are likely to be made in the final report,” the central bank said.
“Members observed that while the regulators had already overseen a tightening of lending standards, and a degree of tightening of lending standards had been implemented by banks in anticipation of the commission’s findings, it was possible that banks could tighten lending conditions further given the issues raised in the report.”
The RBA added that it would be “important to monitor the future supply of credit to ensure that economic activity continued to be appropriately supported”.
Further, the RBA explained its decision to hold the official cash rate at 1.5 per cent, stating that it observed that the “most notable” risk to financial stability were developments in international trade policy, which it said “continued to be a source of uncertainty”.
However, despite acknowledging the slowdown in credit and housing activity, the central bank contended that recent data on economic activity in the Australian economy had been “generally positive and consistent with the forecast for GDP growth to be above potential [growth] over the following two years”.
“GDP growth had been well above potential growth over the year to the June quarter, supported by strong public demand, resource exports, non-mining business investment and steady consumption growth,” the RBA added.
“Employment growth had increased; the participation rate had remained high and the unemployment rate was trending lower.
“Business conditions had also remained positive, although the drought had led to difficult conditions in parts of the farm sector.”
The RBA continued: “Taking account of the available information, members assessed that the current stance of monetary policy would continue to support economic growth and allow for further progress to be made in reducing the unemployment rate and returning inflation towards the midpoint of the target.
“In these circumstances, members continued to agree that the next move in the cash rate was more likely to be an increase than a decrease.”
However, the central bank concluded that since progress on unemployment and inflation was “likely to be gradual”, there is “no strong case for a near-term adjustment in monetary policy”, adding that it would be “appropriate to hold the cash rate steady and for the bank to be a source of stability and confidence while this progress unfolds”.
Tough times for borrowers
This news compounds an already tough market for borrowers, particularly first home buyers.
Recent market surveys indicate first home buyers are relying on "the bank of mum and dad" significantly more than previous generations, and are making significant lifestyle changes and sacrifices to get on the property ladder in Australia.
Those already in the market are also feeling the pinch. Data from the Property Investment Professionals of Australia shows about 13 per cent of borrowers with interest-only arrangements expect to struggle to meet their payments in the coming months.
Property
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market. ...Read more
Property
Federal incentives are driving more first home buyers into the market
While property prices continue to grow, new research suggests that the government’s current crop of first home buyer incentives is having an impact on this segment of the market. ...Read more
Property
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed. ...Read more
Property
Using the 30/30/3 rule for home buying during uncertain times
Thinking of buying a home? Uncertain economic times may have you double guessing your purchase, but the 30/30/3 rule can help you make this a reality. ...Read more
Property
Rental yields reach decade high, but not all markets move at the same pace
Changing consumer preferences towards lifestyle destinations and a lack of supply have led to record national price growth, albeit price fluctuations vary region-to-region, fresh figures show. ...Read more
Property
What younger Australians are getting wrong about home loans
As young Australians look to fight the odds and take their first step onto the property ladder, more and more are making easy mistakes. ...Read more
Property
More than 1 in 3 Aussie properties are cheaper to buy than rent
Having a mortgage is even more likely to be cheaper than renting than it was pre-pandemic, new research has revealed. ...Read more
Property
How will the moratorium on evictions impact landlords and tenants?
The NSW government has announced a 60-day moratorium on evictions, with landlords gifted incentives to reduce the burden on COVID-19-affected tenants. ...Read more
The Olympic effect on property and equity investors; COVID-19 Disaster Payments and super
Listen now
Do lockdowns boost property prices? Are short-sellers levelling the playing field? Did you lodge your tax returns early?
Listen now
Will lockdowns halt the housing boom? Is the metaverse taking over? And the cons of lodging your tax returns early
Listen now
Are you being priced out of the market? Have you got the Tuesday blues? And are you ready for the upcoming super changes?
Listen now
Property
RBA gives APRA’s use of macro tools a tick of approval
Ahead of an expected move to impose tougher lending rules on the banks, the Reserve Bank has looked into previous attempts by APRA to cool the housing market. ...Read more
Property
Federal incentives are driving more first home buyers into the market
While property prices continue to grow, new research suggests that the government’s current crop of first home buyer incentives is having an impact on this segment of the market. ...Read more
Property
Why it now costs 130% more to service a mortgage than 3 decades ago
The lifetime cost of owning a home has increased by over 130 per cent in just three decades, new research has revealed. ...Read more
Property
Using the 30/30/3 rule for home buying during uncertain times
Thinking of buying a home? Uncertain economic times may have you double guessing your purchase, but the 30/30/3 rule can help you make this a reality. ...Read more
Property
Rental yields reach decade high, but not all markets move at the same pace
Changing consumer preferences towards lifestyle destinations and a lack of supply have led to record national price growth, albeit price fluctuations vary region-to-region, fresh figures show. ...Read more
Property
What younger Australians are getting wrong about home loans
As young Australians look to fight the odds and take their first step onto the property ladder, more and more are making easy mistakes. ...Read more
Property
More than 1 in 3 Aussie properties are cheaper to buy than rent
Having a mortgage is even more likely to be cheaper than renting than it was pre-pandemic, new research has revealed. ...Read more
Property
How will the moratorium on evictions impact landlords and tenants?
The NSW government has announced a 60-day moratorium on evictions, with landlords gifted incentives to reduce the burden on COVID-19-affected tenants. ...Read more
More articles
Website Notifications
Get notifications in real-time for staying up to date with content that matters to you.
