Firstmac: Get set for debt-to-income mortgage curbs

Lender Firstmac believes that debt-to-income mortgage curbs are on APRA’s agenda:

Brisbane-based Firstmac… argued the regulator seemed poised to introduce some new steps. “We’re probably not far away from a second round of macro [intervention], which will most likely be debt-to-income ratios,” [chief financial officer James Austin] said…

[Firstmac said] such a ratio would potentially limit 13 per cent of Firstmac’s loan flows, while it seemed regulated entities could be hit by between 20 per cent and 25 per cent.

That was because banks tended to write more “jumbo loans”, such as lending $2 million against a single property, which potentially could suffer larger valuation drops, he said.

The Council of Financial Regulators’ quarterly statement suggested macroprudential measures are incoming:

The Council is mindful that a period of credit growth materially outpacing growth in household income would add to the medium-term risks facing the economy, notwithstanding that lending standards remain sound. Against this background, the Council discussed possible macroprudential policy responses. APRA will continue to consult with the Council on the implementation of any particular measure. Over the next couple of months, APRA also plans to publish an information paper on its framework for implementing macroprudential policy.

Since then, we have seen the proportion of mortgages issued at high debt-to-income ratios soar:

That said, with Sydney’s and Melbourne’s housing markets now stalling, I believe APRA will probably sit on its hands.

Unconventional Economist
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