Australia's banking regulator to curb white-hot housing market

0 Comment(s)Print E-mail Xinhua, October 6, 2021
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SYDNEY, Oct. 6 (Xinhua) -- As rock-bottom interest rates have seen housing prices across Australia skyrocket, the Australian Prudential Regulation Authority (APRA) said Wednesday that they would begin to step in.

The APRA said in an announcement that greater regulations would be put into place for banks when it comes to assessing loan applications.

Part of this includes raising the minimum interest rate buffer on home loan application from 2.5 percent to 3 percent -- a move to marginally reduce Australians' home-loan borrowing capacity.

Despite the country's stagnating economic growth due to COVID-19 lockdowns, housing prices across Australia have grown over 20 percent over the last 12 months, a trend that has largely been attributed to the central bank cash rate of 0.10 percent.

According to the Australian Bureau of Statistics, property prices in the country experienced the largest quarterly jump ever recorded in the three months to June, growing 6.7 percent.

APRA Chair Wayne Byres said the new buffer on interest rates was designed to stabilize Australia's financial system.

"More than one in five new loans approved in the June quarter were at more than six times the borrowers' income," said Byres.

"In taking action, APRA is focused on ensuring the financial system remains safe, and that banks are lending to borrowers who can afford the level of debt they are taking on - both today and into the future."

He said that while the new regulations would affect all customers, they are primarily designed to target over-leveraged property developers rather than first home buyers who are less likely to borrow far above their income due to down payment constraints.

"With the economy expected to bounce back as lockdowns begin to be lifted around the country, the balance of risks is such that stronger serviceability standards are warranted." Enditem

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