RBA says mortgage lending supervision strengthened, notes banks are turning cautious

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Australian mortgage growth has picked up as has demand from landlords pushing up debt levels, the Reserve Bank of Australia said as it kept rates on hold.

With leverage increasing, supervisory measures have strengthened lending standards and some banks are being cautious in lending to certain segments, the central bank said.

Australian regulators have been concerned with the runaway housing market and the debt being piled on my people to buy more and more property. With financial stability in mind, the banking regulator has urged lenders to keep a lid on lending to speculators and has put in place various mechanism to determine borrowing capacity. Still, investor housing credit jumped by 0.8% in December, the largest monthly increase since June 2015 and lending to investors has has now increased in six of the past seven months. That comes as an avalanche of supply of new apartments is set to hit Sydney and Melbourne.

“In some markets, conditions have strengthened further and prices are rising briskly,” RBA Governor Philip Lowe said in the statement. “In the eastern capital cities, a considerable additional supply of apartments is scheduled to come on stream over the next couple of years. Growth in rents is the slowest for a couple of decades.”

Home values, particularly in Sydney and Melbourne has defied expectations and climbed. Sydney home prices have doubled since 2009 and also soared in Melbourne by 85% in that period and there are no signs of prices reversing course. Landlords have driven up the market, leaning on the tax breaks of negative gearing.

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