Responsible home loan lending rules don't need to be overly stringent: Treasurer Josh Frydenberg

Treasurer Josh Frydenberg has expressed a fear that "hard-working families" trying to get a housing loan have been hit by regulators being too stringent in enforcing responsible lending rules.

Frydenberg has welcomed the small rise in capital city housing prices, citing Treasury research that a 10 per cent increase in house prices could boost GDP by 0.5 per cent.

Treasurer Josh Frydenberg has pushed back against regulators being too stringent in enforcing responsible lending rules, warning that this could penalise "hard-working families" trying to get a housing loan and hurt the economy.

"It's vitally important that the housing market remains strong," he said.

"To date, ASIC  has adopted a principles-based and scalable approach. This has allowed flexibility for lenders to appropriately take into account the facts and circumstances of each case and vary the degree of inquiry and verification depending on the customer risk involved."

"Common sense dictates that a sensible balance needs to be struck because an unduly restrictive application of these obligations can do as much harm as an overly lax one. Clearly, the risk that the provision of credit may cause substantial hardship to some should not result in a significantly reduced ability to access credit by the vast majority of borrowers," the Treasurer added. 

After his speech to The Australian Financial Review's Property Summit in Sydney on Thursday, Frydenberg said he expects any further rate cuts to be passed on.

The banking industry has also warned that the flow of credit to key sectors like first-home buyers and small and medium-sized businesses could be disrupted if APRA proceeds with capital reforms that are more stringent than international standards.

The Australian Banking Association says any additional capital required that was in excess of the Basel III requirements would be “detrimental” to the domestic economy.

The so-called Basel III rules are part of a package of measures introduced after the global financial crisis aimed at making banks stronger. 

“At present, Australian economic growth is weak and any further impediments to lending such as increased capital requirements, combined with disadvantages in international markets, will have a further negative impact on economic growth when they come into effect,” the ABA says in a submission to the prudential regulator’s review of the capital framework for banks.