RBA says risks remain for excessive borrowing

Bloomberg

The Reserve Bank of Australia (RBA) said it is important that lending standards are maintained as the risk remains from excessive borrowing in the country’s housing market.
“In Australia, and some other countries, there have been large increases in housing prices and an acceleration in borrowing,” the central bank said in its semi-annual Financial Stability Review. “Vulnerabilities can increase if housing market strength turns to exuberance,” the bank said, while noting this week’s move by the Australian Prudential Regulation Authority in response to these risks.
Australia’s banking regulator raised the minimum interest-rate buffer that lenders need to account for when assessing home-loan applications. Property prices are surging Down Under in response to ultra-low interest rates, a phenomenon witnessed across the developed world following central bank policy easing in the wake of the pandemic.
The unrelenting surge in Australia’s home prices — rising by hundreds of dollars a day in Sydney and Melbourne — is fuelling momentum for macro-prudential measures to contain credit growth and keep a lid on swelling financial risks.
The central bank has said it’s constantly assessing tools, but has held back until now as it focused on supporting the economy with the coronavirus leaving much of the population-heavy east coast in lockdown. The government, which must go to the polls by May, also seemingly wants action on house prices.
The RBA doesn’t control macroprudential tools directly. Rather, they fall under the remit of the banking regulator, which is in regular discussions with the central bank. The Australian Prudential Regulation Authority plans to publish an information paper on its framework for implementing macroprudential policy in coming weeks.