{"id":510,"date":"2021-09-29T02:00:15","date_gmt":"2021-09-29T02:00:15","guid":{"rendered":"http:\/\/blog.effi.com.au\/blogs\/?p=510"},"modified":"2021-09-29T02:00:15","modified_gmt":"2021-09-29T02:00:15","slug":"treasurer-signals-high-debt-home-loan-crackdown","status":"publish","type":"post","link":"http:\/\/13.210.238.202\/blogs\/2021\/09\/29\/treasurer-signals-high-debt-home-loan-crackdown\/","title":{"rendered":"Treasurer signals high-debt home loan crackdown"},"content":{"rendered":"

Concerns over financial risks to the economy correlated to surging property prices and record-low interest rates eventually led the Treasurer to meet with financial regulators to discuss the matter.\u00a0<\/span><\/p>\n

The result: Josh Frydenberg has given regulators the green light to consider clamping down on over-leveraged home loans.\u00a0\u00a0<\/span><\/p>\n

\u201cWith Australia\u2019s economy well positioned to strongly recover as restrictions ease, it is important to continually assess the appropriateness of our macroprudential settings,\u201d Mr Frydenberg said.<\/span><\/p>\n

\u201cWe must be mindful of the balance between credit and income growth to prevent the build-up of future risks in the financial system.<\/span><\/p>\n

\u201cCarefully targeted and timely adjustments are sometimes necessary.<\/span><\/p>\n

Vulnerability building up in balance sheets<\/b><\/h2>\n

It\u2019s true: People are taking larger home loans stretching themselves too thin just to get into the property market. Currently, more than one in five home buyers are borrowing more than 6 times the size of their income.<\/span><\/p>\n

Borrowers are taking on a concerning amount of debt out of desperation. An annual survey of investment bank UBS recently found that among 900 people who took out a mortgage over the past year, <\/span>41% were not being factually accurate in their loan applications<\/span><\/a>.\u00a0<\/span><\/p>\n

If the interest rates rise or there\u2019s a shock to their employment status, borrowers could fail to meet their loan repayments. No doubt, this is a risk that has been building in the balance sheets of banks and households.\u00a0<\/span><\/p>\n

This June quarter, the number of residential mortgages where debt was at least six times greater than income jumped to 21.9% from 16% a year earlier, according to data from the Australian Prudential Regulation Authority (APRA). Additionally, the RBA pointed out that housing credit has been growing at an annualised rate of 7% in recent months which is more than double the rate of income growth.\u00a0\u00a0<\/span><\/p>\n

There\u2019s no date set yet on this crack down. This signifies that within the coming months, regulators could announce new limits to high debt-to-income (DTI) loans.\u00a0<\/span><\/p>\n

Investors targeted\u00a0<\/b><\/h2>\n

The clamp down would be a balancing act to avoid hurting first home buyers. But investors will be affected since the group is more likely to have higher DTI ratios than owner occupiers. Investors often have multiple properties including the one they live in.\u00a0<\/span><\/p>\n

Such a DTI restriction of six or seven would have \u201clittle impact on first-home buyers but would significantly impact investors\u201d according to the Reserve Bank of New Zealand which recently was directed by the government to limit high DTI loans, particularly targeting investors.\u00a0<\/span><\/p>\n

APRA is prepared to release lending restrictions within two months<\/b><\/h2>\n

The Council of Financial Regulators said today it was mindful that a period of credit growth outpacing growth in income would \u201c<\/span>add to the medium-term risks facing the economy, notwithstanding that lending standards remain sound.\u201d<\/span><\/p>\n

\u201cAPRA will continue to consult with the council on the implementation of any particular measure.<\/span><\/p>\n

\u201cOver the next couple of months, APRA also plans to publish an information paper on its framework for implementing macroprudential policy.<\/span><\/p>\n","protected":false},"excerpt":{"rendered":"

Concerns over financial risks to the economy correlated to surging property prices and record-low interest rates eventually led the Treasurer to meet with financial regulators to discuss the matter.\u00a0 The result: Josh Frydenberg has given regulators the green light to consider clamping down on over-leveraged home loans.\u00a0\u00a0 \u201cWith Australia\u2019s economy well positioned to strongly recover …<\/p>\n

Treasurer signals high-debt home loan crackdown<\/span> Read More »<\/a><\/p>\n","protected":false},"author":6,"featured_media":511,"comment_status":"closed","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"spay_email":""},"categories":[3],"tags":[],"jetpack_featured_media_url":"https:\/\/i2.wp.com\/13.210.238.202\/blogs\/wp-content\/uploads\/2021\/09\/Josh-Frydenberg.jpeg?fit=1280%2C720","uagb_featured_image_src":{"full":["https:\/\/i2.wp.com\/13.210.238.202\/blogs\/wp-content\/uploads\/2021\/09\/Josh-Frydenberg.jpeg?fit=1280%2C720",1280,720,false],"thumbnail":["https:\/\/i2.wp.com\/13.210.238.202\/blogs\/wp-content\/uploads\/2021\/09\/Josh-Frydenberg.jpeg?resize=150%2C150",150,150,true],"medium":["https:\/\/i2.wp.com\/13.210.238.202\/blogs\/wp-content\/uploads\/2021\/09\/Josh-Frydenberg.jpeg?fit=300%2C169",300,169,true],"medium_large":["https:\/\/i2.wp.com\/13.210.238.202\/blogs\/wp-content\/uploads\/2021\/09\/Josh-Frydenberg.jpeg?fit=768%2C432",768,432,true],"large":["https:\/\/i2.wp.com\/13.210.238.202\/blogs\/wp-content\/uploads\/2021\/09\/Josh-Frydenberg.jpeg?fit=1024%2C576",1024,576,true],"1536x1536":["https:\/\/i2.wp.com\/13.210.238.202\/blogs\/wp-content\/uploads\/2021\/09\/Josh-Frydenberg.jpeg?fit=1280%2C720",1280,720,true],"2048x2048":["https:\/\/i2.wp.com\/13.210.238.202\/blogs\/wp-content\/uploads\/2021\/09\/Josh-Frydenberg.jpeg?fit=1280%2C720",1280,720,true],"jetpack-portfolio-admin-thumb":["https:\/\/i2.wp.com\/13.210.238.202\/blogs\/wp-content\/uploads\/2021\/09\/Josh-Frydenberg.jpeg?resize=50%2C50",50,50,true]},"uagb_author_info":{"display_name":"Effi Author","author_link":"http:\/\/13.210.238.202\/blogs\/author\/effi-author\/"},"uagb_comment_info":0,"uagb_excerpt":"Concerns over financial risks to the economy correlated to surging property prices and record-low interest rates eventually led the Treasurer to meet with financial regulators to discuss the matter.\u00a0 The result: Josh Frydenberg has given regulators the green light to consider clamping down on over-leveraged home loans.\u00a0\u00a0 \u201cWith Australia\u2019s economy well positioned to strongly recover…","_links":{"self":[{"href":"http:\/\/13.210.238.202\/blogs\/wp-json\/wp\/v2\/posts\/510"}],"collection":[{"href":"http:\/\/13.210.238.202\/blogs\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/13.210.238.202\/blogs\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/13.210.238.202\/blogs\/wp-json\/wp\/v2\/users\/6"}],"replies":[{"embeddable":true,"href":"http:\/\/13.210.238.202\/blogs\/wp-json\/wp\/v2\/comments?post=510"}],"version-history":[{"count":1,"href":"http:\/\/13.210.238.202\/blogs\/wp-json\/wp\/v2\/posts\/510\/revisions"}],"predecessor-version":[{"id":512,"href":"http:\/\/13.210.238.202\/blogs\/wp-json\/wp\/v2\/posts\/510\/revisions\/512"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/13.210.238.202\/blogs\/wp-json\/wp\/v2\/media\/511"}],"wp:attachment":[{"href":"http:\/\/13.210.238.202\/blogs\/wp-json\/wp\/v2\/media?parent=510"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/13.210.238.202\/blogs\/wp-json\/wp\/v2\/categories?post=510"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/13.210.238.202\/blogs\/wp-json\/wp\/v2\/tags?post=510"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}