AUSTRALIA’S “responsible lending” rules have led to longer mortgage approvals without fixing structural problems in the property market, the country’s third-biggest bank by assets said on Wednesday.
A housing-affordability crisis, which economists said could lead to a generation retiring without owning homes, was the product of supply shortage, not difficulty servicing loans, Westpac Banking CEO Peter King said.
King joined other Australian bank CEOs who have said regulatory tightening on loan approvals has added pressure to an industry dealing with narrowing profit margins.
“There’s an efficiency argument there,” King told the Macquarie Australia Conference. “It’s about how much information do we collect and how long does it take? I think we’ve probably gone a little bit too hard on the due diligence.”
Cases of late mortgage repayments are low and the number of borrowers ahead on repayments has risen in the past six months, King said.
Regulation about how much financial data banks must collect from borrowers before approving loans, known as “responsible lending” rules, was tightened after a 2018 public enquiry.
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In the past week, Westpac, National Australia Bank and ANZ Group reported declines in first-half profit as a rapid increase in interest rates prompted borrowers to shop around, grinding down margins.
King said change in interest rates had powered the mortgage market in recent years, but “I think the market going forward will be much more driven by turnover of houses”. REUTERS
