RBA Says Home Lending Remains Strong

Posted on 2/12/2018  
RBA Says Home Lending Remains Strong

The Reserve Bank of Australia has played down claims of a credit crunch in the housing market, pointing out that banks are competing strongly for mortgage business and that lending overall is still growing.

Deputy governor Guy Debelle says that 5% credit growth suggests there is no credit crunch under way.

Assistant governor Christopher Kent says, however, that the rate of credit growth has slowed – and this has multiple causes, including lower demand from investors.

Kent says that while lenders have passed modest increases in funding costs through to borrowers, there is still competition for borrowers, with rates for new loans below those for outstanding loans.

“So credit supply is available to good quality borrowers on good terms and there is a strong financial incentive to shop around,” Kent says.

He also says there has been a modest broad-based decrease in mortgage rates in the past year, indicating banks are responding to weakness in credit demand by competing more vigorously to provide loans to high-quality borrowers.

“Indeed, looking just at new loans there is some evidence that average variable interest rates declined by more for investors than owner-occupiers, which is consistent with a noticeable decline in the demand for investor credit.”

The comments counter claims of a credit crunch by the banks. Federal Treasurer Josh Frydenberg has urged the banks to lend for the good of the country.

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