Why borrowers need guidance on home lending shifts

By Kay Rivera

HIA said that it is important to aid borrowers as housing cycle turns

The Housing Industry Association (HIA) put the spotlight on the importance of having a clear guidance for any potential changes that an Aussie may encounter in home lending.

This is relevant because Melbourne and Sydney housing markets are currently cooling and borrowers are still bothered with any potential increase in their borrowing costs despite the steady cash rate.

The lack of direction or assistance from concerned sectors has caused inconvenience to households. After the Global Financial Crisis, lenders frequently modified home loan rates independently of movements in the official cash rate to ensure that their lending rates more accurately reflect their true cost of capital.

Lenders have also been recently squeezed by regulators, resulting in a degree of credit rationing and higher borrowing costs for investors and those wishing to borrow in interest only terms.

Further, it was noted that APRA’s interventions significantly affected market trends and having no clear guidance could burden borrowers even more.

“APRA’s interventions were appropriate at the time that they were implemented – acting to curb growth in risky lending and the by-product was to cool the housing market. The housing downturn now has its own momentum and does not need additional assistance from the regulator,” HIA Senior Economist Geordan Murray said.

Murray further cited the figures from RBA that showed growth in housing credit to investors dropping to a new low, as well as the slowdown in owner-occupier lending growth.

“The housing market is now in a very different position to the time when APRA imposed the restrictions. We have already seen the speed limit on investor lending dropped but other restrictions remain, “he said.

In the end, Murray asked the central bank and the sectors of the government to work hand in hand in order to undergo the housing cycle turns successfully.

“It will be important for the RBA, APRA and the federal government to monitor developments in the housing market and ensure that we have appropriate policy settings to ride out the cyclical downturn smoothly,” he concluded.

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