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New lending rules are highly likely to be introduced before the end of the year, according to the Reserve Bank of Australia.
Assistant governor Malcolm Edey told the federal government’s Inquiry into Affordable Housing yesterday that there was growing concern about riskier lending practices, increasing speculative activity and growing investor borrowing.
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Mr Edey said the Reserve Bank was in discussions with APRA about how to respond.
He added that he was “confident” action would be taken, but that implementing LVR restrictions was “not a realistic option” because they would target first home buyers rather than investors.
“When we’ve talked about the nature of the problem what we have said is we think there is an imbalance in the form of excessive activity by investors in the market that is out of proportion of their normal share in the housing market,” he said.
Loans-to-investors now account for almost 50 per cent of new housing loan approvals, according to Mr Edey.
“Investor activity has been particularly concentrated in NSW and Victoria. In NSW, investor loan approvals have increased by about 90 per cent over the past two years,” he said.
Luci Ellis, who heads the Financial Stability Department at the Reserve Bank, told the inquiry that the authorities had no desire to “kill” the investor market.
“What we are trying to do is mitigate risk. I expect there will at least be a preliminary announcement before the end of the year,” she said.
[Related: Debate continues about changes to home loan rules]
