Treasurer Josh Frydenberg seeks financial regulator clamp down on home loans

Financial regulators are working on plans for a clamp down
Treasurer Josh Frydenberg seeks financial regulator clamp down on home loans
Jonathan ChancellorSeptember 27, 2021
Treasurer Josh Frydenberg has suggested financial regulators look at cracking down on high-debt home loans. The hope is to reduce financial risks at a time of record-low home loan rates and surging property prices. The Australian Financial Review reported financial regulators have been asked to work on plans to clamp down on high debt-to-income ratios among new borrowers. More than one in five potential home-buyers borrow more than six times their income, the AFR noted. "Last Friday, I joined the Council of Financial Regulators to discuss a range of issues including the state of the housing market which is a particular focus for both APRA and the RBA," Treasurer Josh Frydenberg later told the ABC in a statement. "We must be mindful of the balance between credit and income growth to prevent the build-up of future risks in the financial system. "Carefully targeted and timely adjustments are sometimes necessary. There are a range of tools available to APRA to deliver this outcome." The CBA chief executive Matt Comyn warned last week, with interest rates at record lows, that borrowers could be taking on too much debt. He made the call for macro prudential measures while appearing before the House of Representatives economics committee. Comyn said he was not particularly concerned about the current circumstances, but suggested it was prudent for regulators to take proactive regulatory action. He thought it better for regulators to avoid harsher measures in the future, such as those imposed in New Zealand, given the apparent speed at which Australian capital city property prices are rising. “We think it would be important to take some modest steps sooner rather than later to take some of the heat out of the housing market,” Mr Comyn said. It comes as investment bank UBS has warned that a record level of "liar loans" as buyers "chase the market." The bank's annual survey of around 900 new borrowers over the past year showed that 41 per cent submitted loan applications not completely factually accurate — so-called "liar loans". It was a record high in the seven year survey, up from 38 per cent last year and 27 per cent when the survey started in 2015.

Jonathan Chancellor

Jonathan Chancellor is one of Australia's most respected property journalists, having been at the top of the game since the early 1980s. Jonathan co-founded the property industry website Property Observer and has written for national and international publications.

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