RBA emphasizes the need to focus on lending standards

Font size :

The Reserve Bank’s head of financial stability Luci Ellis said that regulators should intensify their focus on bank lending standards to make sure that property meltdowns are avoided. She also downplayed the chances of a lift in borrowing rates with the nation losing its AAA credit rating.

“Countries that have experienced sovereign downgrades from where we are to the next level down generally don’t see much of an effect on prices, given everything else,” Ellis said. “Often the ratings downgrade is a validation of what the market already thought.”

The senior bank official also reiterated that bank asset quality matters more than quantity. “For that reason, good lending and borrowing habits are more important to instill than a policy approach centred on a few numbers,” she said. 

Ellis’ comments are essential amid investor concerns that the Big Four banks--ANZ, Westpac, National Australia Bank, and Commonwealth Bank--may be forced to raise up to $30 billion next year to meet the Basel IV reforms. The banks are resisting raising more capital as it would reduce returns. However, the Australian Prudential Regulation Authority said last week that forthcoming international policy developments mean that banks should continue raising capital.

Regulators can help by focusing more on the quality of loans being written.

“If the banking system maintains sound underwriting standards at the level of the individual loan, we can have some confidence that the aggregate outcome is also sound,” Ellis said.

It can be confusing to know whether to get a variable rate or fixed rate mortgage, and what features are important. That's why it's important to not only check the right rates, but make sure that you're getting the right features in your home loan. Get help choosing the right home loan

Mortgage News and Articles

How to tell when a housing market is cooling How to tell when a housing market is cooling

You need to check clearance rates, listings, and the price gap, among other factors Read more

Growing demand for green apartments in Sydney Growing demand for green apartments in Sydney Both owner-occupiers and investors favour eco-friendly buildings for their energy-saving features and reduced environmental footprint ... Read more

Are property investors as rich as they appear? Are property investors as rich as they appear? A multi-property portfolio doesn’t guarantee easy millions ... Read more

Be proactive about getting a better mortgage deal Be proactive about getting a better mortgage deal Apathy could be costing you a considerable amount of money over the lifespan of your loan ... Read more

More mortgage news and articles

Sponsored Links

Sunday, Sep 24, 2017
Top Featured Rates
Top Bank Rates

Get help choosing the right home loan

Let us help you find the right home loan for your needs.

Tell us a bit about your circumstances:
  • Purpose of mortgage
  • Household Income
    $
  • How much do you want to borrow?
    $
  • How much deposit do you have?
    $
  • How much is your house worth?
    $
  • How much do you still owe on your mortgage?
    $
  • What type of mortgage do you have?


  • How much is your new home?
    $
  • How much do you want to borrow?
    $
  • How soon do you want a mortgage?
Next
  • First name
  • Last name
  • Where do you live?
  • Phone number

Special Offers

Related Keywords