Following remarks from RBA governor Philip Lowe last month that supervision of Australian lenders would likely be tightened further should investor credit growth keep accelerating, another leading RBA official has warned that tighter macroprudential policies may be on the way to curb growing risks in Australia’s housing market.
Speaking in Sydney on Tuesday morning, Michele Bullock, the bank’s assistant governor of financial systems, said that initial macroprudential measures introduced by Australia’s banking regulator, APRA, could be tightened further in light of recent investor-led heat in the nation’s eastern capitals.
“There is no doubt that the actions did address some of the risks,” said Bullock in relation to APRA introduction of a 10% annual cap in credit growth to housing investors in December 2014.
“The share of new loans that were interest only was drifting up and the growth of lending for investment properties was accelerating.
“Unsurprisingly in this environment, the growth in housing prices was strong, particularly in Melbourne and Sydney,” she added.
It seems eerily familiar to what is being witnessed in early 2017, helping to explain why some prominent economists such as Bill Evans from Westpac believe that tighter restrictions are likely to be implemented in the coming months should the current trends be maintained.
Doing little to douse those expectations, Bullock said that “the early experience suggests that, while the resilience of both borrowers and lenders has no doubt improved, the initial effects on credit and some other indicators we use to assess risk may fade over time,” adding that the RBA is “continuing to monitor their ongoing effects and are prepared to do more if needed”.
According to Australian housing finance data released by the ABS last week, lending to housing investors increased by 4.2% to $13.784 billion in January, the largest monthly total since May 2015.
It was 27.5% higher than the levels of a year earlier, the strongest growth recorded since January 2015, the month after APRA introduced its cap on investor borrowing.
Separate data released by the RBA said that housing investor credit increased by 6.6% in the year to January, below APRA’s annual 10% cap but a significant acceleration on the levels reported in mid-2016.
NOW WATCH: Money & Markets videos
Business Insider Emails & Alerts
Site highlights each day to your inbox.