APRA concern at increase in high debt-to-income lending

The Australian Prudential Regulation Authority chairman Wayne Byres has expressed concern at the increase in high debt-to-income lending. “Credit growth is picking up," he told a parliamentary committee on economics on Friday. “We are weighing up a raft of different considerations. "There are risk metrics that tell us different things. "The issue of concern at present is that there is an increase in high debt-to-income lending, but it’s offset against a number of other metrics which are going in a more positive direction from a prudential perspective,” he said. "In the most recent quarter the risk metrics that we look at are sort of a mixed picture, interest-only loans have come down as a share of new lending, high LVR (loan-to-value ratio) loans have come down … offset balances are high and banks are not overriding policies to any serious degree.” Byres said banks’ balance sheets remained strong and their lending showed no obvious “poor quality” lending, albeit the situation was complicated by lockdowns across several states and negligible population growth. "There is potential for household debt levels to run well ahead of income growth levels for an extended period,” he noted.