Banks Should Not Let Lending Practices Slip: RBA
The Reserve Bank of Australia (RBA) has warned banks not to let lending standards fall as the financial sector could be shaken from any debt blow out under a housing price correction.
In its biannual financial stability review (pdf), the central bank stressed the importance of the financial sector avoiding excessive risk-taking in the form of looser lending standards or relaxation of internal limits.
“Even if lenders do not weaken their own settings, increased risk-taking by optimistic borrowers could see a deterioration in the average quality of new lending,” the review said. “This would weaken the resilience of businesses and households, and so the financial system, to future shocks.”
Aussie Housing Boom Continues as International Investors Surge on the Back of Pandemic Response
Australia’s real estate market is continuing to boom, but unlike the 2016 housing surge, investors are not coming from China.
Residential housing experienced its strongest month of growth in February since 2003, with overseas investors from the United States, United Kingdom, Singapore, and Hong Kong showing a keen interest in the local residential property, as investors feel positive about the economic recovery in Australia.
According to Domain, investor loans were up 22.7 percent over the last year from January and 9.4 percent over the month.
Nerida Conisbee, chief economist at realestate.com.au, speculates that the positive situation with COVID-19 and quick economic recovery is behind the surge.