CBA boosts home loan book to $423 billion
Moves to cap lending to housing investors would have a moderating effect in the short term, but the popularity of Sydney and Melbourne meant prices had further to run, the Commonwealth Bank CEO Ian Narev tips.
Ian Narev also pointed to limited supply as a factor in escalating property prices, after the nation's biggest lender for housing advised home loans balances rose 6.6% for the year from $400 billion to $423 billion. Brokernews.com.au reported broker-originated loans accounted for 45% of new business during the year, with brokers now making up 43% of the major bank’s entire home loan portfolio. The home loan lending growth of 6.6% in the year to June 2015 was behind overall lending system growth of 7.4%.
The recent actions from the Australian Prudential Regulation Authority to cap the lending growth to housing investors would, Narev said, in the short term have a moderating effect on immediate investor demand, but the popularity of Sydney and Melbourne as places to live combined with limited supply suggested prices have further to run over the longer term.
"On the one hand, if you look year on year, the run-up in property prices in [parts of Sydney and Melbourne] feels like it's going to have to come off. But on the other hand, when you again look back on these fundamental forces of supply of demand, some of them might be around for quite some period of time yet," Mr Narev said in an Fairfax Media interview.
Ian Narev revealed CBA had lifted rates on investors loans by 27 basis point last month to avoid the rush of borrowers fleeing competitors, which would have pushed CBA above APRA's 10% growth limit.
"When others are taking action there is a flow effect of extra activity, you have got to be very careful that even without changing your own settings, you don't suddenly get to the point that by the virtue of others doing less, you get to the 10% barrier," he said.
"The pricing was a direct response to that risk and that is why we made that decision."
Commonwealth Bank of Australia (CBA) has reported a five per cent rise in profit to $9.14 billion for 2014-15 but its revenue increased only 1% in the second half while expenses rose 3%.