Following news yesterday that high loan-to-value ratio (LVR) mortgage lending is on the rise, chairman of the Australian Prudential Regulatory Authority (APRA), John Laker, has declared the regulator is monitoring the situation closely, and has vowed to take action if necessary against individual lenders. From the AFR:
“One area of higher risk that APRA is monitoring closely is high loan-to-valuation ratio housing lending,” Dr Laker said in an October 29 speech, previously unreported.
“We are also monitoring interest-only lending to owner-occupiers more closely, so that we can understand whether this is sensible lending or a speculative play by the borrower”…
“You may be aware that the Reserve Bank of New Zealand has placed speed limits on this type of lending in their market,” Dr Laker said.
“We are keeping our powder dry on that option but we will take supervisory action if an ADI [authorised deposit-taking institution] is skewing its housing loan portfolio too heavily in favour of high LVR lending.”
I fail to see how waiting until the housing market has boiled over before implementing macro-prudential controls on mortgage lending is sensible. Surely, preventing a potential bubble from occurring in the first place is a far safer approach?
