MELBOURNE, Australia--Australia's big banks are further
tightening lending to housing speculators as authorities continue
to fret about risks to the country's hot property market.
Westpac Banking Corp., the largest lender to housing investors,
from Wednesday will limit loans to 80% of the value of homes being
bought by prospective landlords, from 95% previously. At the same
time, Australia & New Zealand Banking Group Ltd. is capping its
loan-to-value ratio at 90%, down from 97% earlier.
It follows similar steps to lower lending ratios in recent weeks
by Commonwealth Bank of Australia Ltd. and National Australia Bank
Ltd., which with Westpac and ANZ dominate Australia's mortgage
market.
Home prices have continued to rise across most of Australia,
particularly in Sydney where they have jumped about 40% since 2012.
New lending has been dominated by investor mortgages, which the
central bank has warned is distorting the market, and last year
prompted the banking regulator to call for investor lending growth
to be limited to 10%.
After opting to keep the benchmark cash rate at a record-low 2%
on Tuesday, Reserve Bank of Australia Gov. Glenn Stevens said the
bank was working with other regulators to assess and contain risks
that could arise in the property market.
Some economists have said concerns about overheating the
property market have stayed the central bank from another swift
rate cut to further stimulate other parts of the economy as
investment in the mining industry falls.
Wayne Byres, chairman of the Australian Prudential Regulation
Authority, last month told a senate committee hearing in Canberra
that the regulator would be watching carefully for the banks to
revise policies to ensure they had ended lending practices that
were "less than prudent."
Success in ensuring mortgage portfolios remained low-risk would
be measured by changes in house prices, he said.
The four big banks in May cut discounts to advertised lending
rates being offering to new property investors.
Westpac said it had introduced the latest changes to ensure it
meets APRA's 10% target. A spokeswoman for ANZ said the bank was
adjusting its appetite for investor loans, including reviewing
standards it requires borrowers to meet to service their loans.
The lender told its mortgage brokers that from July 25 it would
introduce a 7.25% interest rate "floor," effectively meaning
borrowers would need to show they can continue to make payments
even if interest rates rise that high.
In several towns across the country dependent on mining
companies struggling with a slump in prices for key commodities
such as iron ore, ANZ recently required all new customers including
landlords put down a minimum deposit of 30% of the property
value.
NAB last month reduced its investor loan-to-value ratio to 90%
from 95%. In letters to brokers, Commonwealth Bank last month said
it would tighten standards, including enforcing a minimum rate
floor of 7.25% on all loans, changes to the way overtime and
bonuses of customers is assessed, and reducing the assumed gross
rental yield on properties.
Write to Robb M. Stewart at robb.stewart@wsj.com
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