While the shift to better, and perhaps more importantly, consistent lending standards has meant “some uncertainty and disruption for borrowers and lenders, as well as other parties such as mortgage brokers”, this reflected just how much standards had deteriorated.
Stability over competition
The second audience for the report is those APRA critics, including the Productivity Commission, who have argued the regulator has prioritised stability over competition.
APRA’s self-assessment argues it was able to balance the twin priorities. While lending standards have improved, and the potential risk concentration of investor-only loans have been largely washed out of the system, APRA says it was cognisant of “concerns about potential impacts on competition”.
First, APRA argues its “mortgage measures resulted in a more level playing field for ADIs in terms of their borrower risk assessments, which also reduced their ability to compete for customers through easier credit standards.”
And second, it “took a more flexible approach” with smaller banks when it brought in temporary caps on the writing of interest-only loans to investors. The little guys were given more time to get their interest-only loans growth rates under APRA’s caps and as a result of its worthy vigilance, APRA says the share of mortgage lending by smaller banks actually rose after its investor-loan caps were introduced.
It’s notable that while APRA acknowledges that some lenders have adopted “a highly cautious approach to lending” – something that is clearly starting to worry the government – it also points out that high household debt levels are not going away.
And neither, one suspects, is the philosophical fight between competition and stability.
from Just News Viral http://bit.ly/2HBf71O
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