Sumary of RBA not fazed by red hot housing market:
- AAP Share to FacebookShare to TwitterEmail UsCopy the Link The Reserve Bank knows it is fuelling cheap finance for home buyers, as property prices surge in cities and the regions, but is not worried about undue risk to financial stability..
- To date the growth in asset prices has not been associated with a significant increase in the growth of debt, according to the RBA twice-yearly assessment of Australia financial system issued on Friday..
- Housing price growth, and to a lesser extent housing borrowing, has picked up notably in recent months and is being watched closely by regulatory authorities..
- Housing prices in many economies have been rising, which has mitigated the risk earlier in the pandemic that falling prices would result in significant losses on mortgage lending..
- “In an environment of accommodative financial conditions with rising asset prices it is particularly important that there is not excessive risk-taking by the financial sector,”.
- Increased risk-taking by lenders could take the form of looser lending standards for individual loan assessments, or a relaxation of internal limits on the share of riskier loans they make..
- “Even if lenders do not weaken their own settings, increased risk-taking by optimistic borrowers could see a deterioration in the average quality of new lending,”.
- The RBA cited improvement in residential lending standards dating to the mid-2010s as helping to ensure borrowers were well placed to weather the recession, “demonstrating the benefits to the financial system and the economy of appropriately controlling risks”…