Australia’s chief banking regulator has dismissed the idea that the country is experiencing a credit squeeze.
APRA chairman Wayne Byres, in his opening statement to the Senate Economics Legislation Committee, said that while growth in home loans is slowing, this slowdown isn’t occurring simply because banks are reluctant to give mortgages.
“It also reflects a range of other factors, including a natural reduction in the demand for new credit at a time of declining prices, and when existing household debt levels are already very high,” he said.
“Banks remain willing to lend, and continue to provide competitive offers to the market: as a number of banks have noted, while approval timeframes may have lengthened and maximum loan amounts reduced, neither approval rates nor loan sizes have materially declined.”
Lenders well placed to handle market downturn
Mr Byres noted that property markets in Sydney and Melbourne are falling after a long period of rapid growth, while some other capitals are experiencing a gentler downturn.
He said that APRA had worked hard in recent years, particularly in 2015-17, to make sure that lenders were in a position to manage the “inevitable softening” of the market.
“The sounder lending standards and robust capital positions that have been put in place in recent years have positioned the banking system to withstand the adjustment process,” he said.
“As we have said on many occasions, sound lending standards need to be applied through the cycle, regardless of whether housing prices are rising, falling or moving sideways.”