The Australian Prudential Regulation Authority has resisted the urge to curb home lending in the face of the current house price boom.
APRA says they won’t be clamping down this time around because the price rises are not across the board and the economic situation is different to when it last stepped in.
Speaking at a parliamentary committee, APRA chair Wayne Byres said that despite the price growth and rising auction clearance rates, there was no evidence to suggest that lending standards had actually deteriorated.
Mr Byres said this time around the booming market was being driven by first-home buyers, with most looking for detached dwellings causing a supply and demand imbalance and prices to rise.
“It’s not our job to solve house prices and it’s not our job to solve house pricing affordability,” he said.
“We are watching for a deterioration in lending standings, and that’s not evident at this point.
“That is not to say it won’t emerge, but it’s not obvious at this point.”
APRA has capped the proportion of risky loans being written by banks twice in the last decade to protect bank depositors and the stability of the financial system.
Mr Byres said APRA, along with the Reserve Bank and the Australian Securities and Investments Commission were keeping a close eye on things such as high loan-to-value (LVR) ratios and debt-to-income (DTI) loans.
“It’s very dangerous to be mechanical in that way,” he said.
“DTI greater than six times and high LVR, they are up marginally, but to some extent they are a product of a very high share of lending to first-home buyers that tend to borrow at high LVR and on low incomes.”
“We are watching with our fellow regulators. It’s something to keep a close eye on.”