National Australia Bank is turning up the heat on rivals by making it easier for property borrowers to qualify for home loans amid concerns that red-hot property markets are beginning to boil.
The bank, which last month increased fixed interest rates on two, three and four-year mortgages, has cut the key measurement used to assess borrowers’ ability to repay by 15 basis points to 7.25 per cent.
The move comes as investment bankers warn that investor housing credit “has reaccelerated” close to the Australian Prudential Regulation Authority’s 10 per cent annual growth limit, which could trigger a new round of regulatory action to toughen lending conditions.
NAB’s new rate brings it into line with its major rivals, such as Australia and New Zealand Banking Group and Commonwealth Bank of Australia, but the move is expected to increase pressure on smaller rivals.
Snooooooooooooooore. From Shane Oliver:
While a surge in housing supply to record levels will act to slow the property market this is still yet to become clearly apparent (except perhaps in Melbourne unit prices).
In the meantime the focus around APRA tightening its macroprudential measures in order to slow investor activity in the Sydney and Melbourne markets, in order to provide the RBA with ongoing necessary flexibility on interest rates, is likely to intensify.
We remain of the view that the RBA will cut interest rates again but not until May, but this likely to require either some slowing in property price momentum or a further tightening in APRA’s macroprudential policies.
APRA snails will have to drop the macroprudential ceiling to 5% first.
