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A leading broker has refuted claims by the Australian Prudential Regulation Authority (APRA) that attractive rates and poor serviceability calculations are causing the market to head toward a GFC-style crash.
Earlier this week, APRA warned banks to not loosen serviceability standards as more and more borrowers flock to the market.
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“The quality of Authorised Deposit-taking Institutions (ADIs) housing lending portfolios has proven very resilient during the global financial crisis… [due] to the generally sound housing lending standards,” the regulator said in its policy Insight report.
“In particular, low interest rates can mask debt serviceability assessments, creating opportunities for borrowers to increase their leverage. The resulting growth in demand for housing loans can also put pressure on housing lending standards as ADIs compete to maintain or increase their market share.”
However, director of First Point Mortgages Troy Phillips, an almost 30-year industry veteran, told The Adviser that banks were not “giving money away”.
“Property has become a popular topic again, rates are low and a lot of people are coming into the market. But I’m not seeing any lax credit out there, I’m not seeing anyone throwing money out the door,” he said.
Mr Phillips said that no matter how competitive lenders get, brokers won’t suggest a loan product that isn’t within a borrower’s serviceability, nor would the banks approve it.
“Anything over 80 per cent LVR needs to be stress-tested by the insurers as well, so there’s more than just one hurdle to ensure serviceability… and with all the regulations on brokers, it all comes down the line to them.
“A broker isn’t going to just ‘tick the boxes’ and hope it’s approved. They’ll take into account that rates are going to fluctuate and rise, and adjust accordingly,” he said.
