At the AFR this morning there are two stories about the growth in high LVR lending. One from Robert Harley:
Martin North, the principal of boutique research consultancy, Digital Finance Analytics, also notes that high LVRs can depress the economy.
When interest rates inevitably rise, borrowers, geared to the maximum, stop discretionary spending. The result, as happened in Western Sydney last decade, can be years of stagnation.
…North, who has long followed the mortgage industry, has no doubt the banks have become more aggressive.
The non-conforming lenders,like Liberty Financial, Pepper Home Loans and Bluestone Mortgates, are back lending aggressively and the big banks are being forced to follow.
Yet we have this as well from Duncan Hughes:
Recent warnings by Australian Prudential Regulatory Authority about increasing risky lending is believed to have contributed to a fall from 73 per cent to 68 per cent of the number of loans with a LVR of 95 per cent, or higher…Alex Parsons, chief executive of RateCity, said he expects APRA’s recent warning has already caused banks to start tightening lending criteria to avoid a local repeat of New Zealand’s central bank’s clamp-down on the number of high LVR loans being written.
Plenty of rumor, innuendo and self-promotion but not much clarity. Has APRA’s warning worked or not and why on earth don’t we have clear rules that let us judge? The secrecy around ARPA has to go.
