Ensure you never miss an issue of the
real estate business bulletin
Lending standards remain robust: RBA

Lending standards remain robust: RBA

by Reporter 0 comments

Staff Reporter

Australia is not at risk of falling victim to a US style recession, with local lenders maintaining robust lending standards, the Reserve Bank of Australia's Luci Ellis has claimed.

Speaking at the Australian Mortgage Conference in Sydney yesterday, the RBA's head of financial stability department said Australia, like many other countries, does not have the ingredients needed to create an outcome like that in the United States.

"If I may use an analogy: we know that the key to maintaining a healthy weight is to have a healthy diet and to exercise regularly. Yet we find it hard to avoid temptation. And so it is with maintaining a healthy mortgage market," Ms Ellis said.

"It is always tempting to ease lending standards, and dress that up as responding to competition or giving the customer a better deal. It must be hard to resist the disappointed customers who just want to borrow that bit extra to purchase their dream home, especially when the loan officer is also trying to make budget on new loan approvals. But in the experience of the United States, we have seen what can happen when lenders yield to that temptation."

Ms Ellis said if lenders were to ease lending standards beyond the point of prudence, they would not be doing anyone any favours.

"Their customers, the borrowers, would be overburdened by their debts. The firm themselves would face difficulties if loan defaults were to rise. And financial stability would be much harder to maintain," she said.

"I am pleased to say that I do not currently see signs of widespread lax lending practices here in Australia. Indeed, APRA has been consulting with the boards of the larger banking institutions about their housing lending standards. But there will be times – good times, when everything seems rosy – when lenders will find it hard to maintain the necessary prudence.

"While the regulators can take actions and central bankers like me can warn of the risks, in the end we all have a stake in maintaining financial stability. For financial stability is in the collective interest of all Australians."

le>.b-autolinks{text-decoration:underline}.b-autolinkshadowbox { display: inline; position: relative; cursor: pointer; color: #428bca;} .b-autolinkshadowbox:hover > span { display: block !important; } .b-autolinkshadowbox__links { white-space: nowrap; z-index: 999; display: none; left: 0; border: 1px solid #bfbfbf; border-radius: 5px; font-size: 12px; top: 12px;color: #000; padding: 10px; position: absolute; background-color: #FFF; box-shadow: 0px 0px 20px 1px #bfbfbf; } .b-autolinkshadowbox__links > a { display: block; padding: 3px 0; }
Lending standards remain robust: RBA
lawyersweekly logo
promoted content
Recommended by Spike Native Network
Listen to other installment of the Real Estate Business Podcast
reb top 100 agents 2017

The REB Top 100 Agents ranking is the foremost ranking of agents in Australia. It has set the bar for excellence in Australian real estate. To be ranked as an REB Top 100 Agent is the standard real estate professionals strive for. See the full 2018 ranking here!

featured podcast

featured podcast
An industry where the resilient succeeds

Tim Heavyside believes that a strong support team and good foundations are paramount to success in the real estate industry, and with regu...

View all podcasts

Would you consider working for Purplebricks or a similar 'DIY' model?

Yes (7.2%)
No (80.9%)
Perhaps - make me an offer (12%)

Total votes: 209
The voting for this poll has ended on: July 13, 2018
Do you have an industry update?