Under the changes announced by the Australian Prudential Regulation Authority (APRA),banks will be forced to use more cautious interest rate assumptions when assessing new customers. The change is expected to reduce new customers’ borrowing capacity by about 5 per cent.
Economists and banks said the changes would take some heat out of the property boom - which has seen Sydney house prices jump more than 20 per cent in the last year - but they were unlikely to cause prices to fall.
Commonwealth Bank chief executive Matt Comyn said APRA’s move was a sensible step for borrowers and banks,and he flagged the possibility that more tightening could be needed.
“We will implement the changes this month and expect that it may be necessary to consider additional steps as lockdowns end and consumer confidence increases,” Mr Comyn said.
Treasurer Josh Frydenberg said that while the economy was well positioned to strongly recover as lockdown restrictions eased,it was important to assess the appropriateness of macroprudential settings. “We must be mindful of the balance between credit and income growth to prevent the build up of future risks in the financial system,” he toldThe Sydney Morning Herald andThe Age.
“The measures announced today by APRA and supported by the Council of Financial Regulators represent a targeted and prudent step to address these risks.”