An RBA official says Australian banks have understated the value of investor loans and it justifies the decision from regulators to crack down on investor loans.
RBA deputy governor Philip Lowe made the comments to a financial conference in Sydney, saying the RBA was concerned that loans to investors by banks had been understated by $50 billion.
Reviews found over 10 financial institutions that included two of the biggest lenders had outstanding loans that were the aforementioned $50 billion higher than previously thought, which represented a 10 per cent increase.
The new assessment has the total value of investor loans outstanding in Australia at $500 billion.
“As lenders have looked more closely, what they have found has surprised and, to some extent, concerned us,” he said.
The new data also shows that the percentage of loans out to investors is actually 40 per cent of the total compared to 35 per cent, which was previously thought.
Mr Lowe said although banks could show how some of the figures were wrong, it was still hazy on why there were other inaccuracies.
“While the reasons for some of these earlier errors have been identified, in other cases the reasons are unclear and lenders have not been able to provide comprehensive back data,” he said.
Mr Lowe said the incorrect figures showed the crackdown from regulators such as the Australian Prudential Regulation Authority were the right move, but that the amount of lending to investors hadn’t fallen by as much as first thought.
According to Mr Lowe, some lenders had reported investor loans to the RBA that were actually loans to owner-occupiers.
“This is partly because, when faced with the higher interest rate on investor loans, some borrowers have indicated to their bank that they are not an investor, but rather an owner-occupier, and so should not have to pay the higher rate,” Mr Lowe said.
“And it is disappointing that some lenders’ internal systems have not been up to the task of reporting accurate data on the split between investor and owner-occupied housing loans.”
The crackdown from APRA currently orders bank to limit investor lending to a growth rate of no more than 10 per cent annually.