Change in Lending Rules Not Needed For Now

In an article for the website The Adviser, Nick Bendel talks about mortgage broker heads going ballistic over the proposed introduction of the new lending rules. The Reserve bank of Australia feels that the property boom in Sydney and Melbourne warrants a change in lending rules.

Macro-prudential regulation not required for now

The mortgage broker heads have a different take on this. They believe that slowdown in dwelling prices witnessed in many capital cities compensate for the property boom in Sydney, Melbourne and to an extent Brisbane. This implies that any macro-prudential regulation is quite unnecessary at the moment.

More dwellings needed….not a change in lending rules

Prices are already correcting themselves and instead of altering the lending rules, the government should show keenness towards building more dwellings. 180,000 dwellings are needed each year but the present level of construction would see supply trailing demand for at least some time to come.

Sydney has had its share of tough days and what we are witnessing is a rebound so toughened lending rules are not going to change the macro picture. If anything, they will worsen the situation.

You can read the original article here.

Sydney was in trough for long

In my opinion, one reason why Sydney’s price boom looks phenomenal is that it was lying in the trough area for long. What has been a correction or a rebound is looking like an astonishing growth. This clearly is not the case though.

Growth rate to mellow down

Moreover, growth in Sydney and Melbourne is only expected to mellow down from here. In 2015, the growth rate is likely to be near 5%-7% in place of the awe-inspiring 13%-14% seen lately. Thus, I think that the Reserve Bank of Australia must retrace its steps and figure out something else. Lending rules, at least for the time being, will do well to remain what they have been.

Do you think the RBA should alter lending rules?