Australian Banks Push for Relaxed Lending Rules Amid RisingMortgage Hardship

As rising mortgage hardship cases grip Australia, banks and mortgage brokers are pushing for a relaxation of lending regulations, sparking concerns among consumer groups. The November 2023 rate hike and expiring fixed-rate mortgages have significantly impacted the living costs of employee households, according to the Australian Bureau of Statistics (ABS) latest release.

Why this matters: The debate over lending regulations has significant implications for the stability of the housing market and the financial well-being of Australian households. If regulations are relaxed, it could lead to a surge in mortgage approvals, potentially exacerbating the issue of mortgage hardship and putting more households at risk of default.

Mortgage demand has fallen, reversing the positive growth recorded in the December 2023 quarter, as reported by Equifax. Despite this, home prices have maintained a steady pace of growth, with CoreLogic data showing a new record for house and unit prices across the combined capitals. In March 2024, the growth rate of a major bank's mortgage book doubled, as revealed by the Australian Prudential Regulation Authority (APRA).

An unnamed source has suggested that "getting government out of the way" would help alleviate housing issues. However, consumer groups have expressed concerns over the potential relaxation of lending regulations, citing the need for stricter rules to protect borrowers. Stephanie Tonkin, CEO of the Consumer Action Law Centre, emphasized that "lending laws are in place to make sure that credit and lending is safe." The economy has been a significant factor in the ongoing debate.

Banks, including the Commonwealth Bank, ANZ, and NAB, argue that current regulations, introduced after the banking royal commission, have created an inequitable system where only wealthier individuals can access credit. ANZ CEO Shayne Elliott stated, "Our view is that it's the unintended consequence of that is that it is harder to get a home loan or a credit card in Australia or New Zealand today than it has been in 30 years." NAB CEO Andrew Irvine echoed this sentiment, noting that the collective effect of the regulations has made it challenging for banks to serve the needs of lower-income households.

The push for relaxed lending regulations comes amidst rising mortgage hardship cases and falling mortgage demand. An economist has warned that interest rate hikes may continue to rise in the later half of 2024, further exacerbating the situation. As the debate over lending regulations intensifies, the future of Australia's housing market hangs in the balance, with the well-being of countless households at stake.

Key Takeaways

• Australia sees rising mortgage hardship cases amidst rate hikes and expiring fixed-rate mortgages.
• Banks and brokers push for relaxed lending regulations, sparking consumer group concerns.
• Mortgage demand falls, but home prices maintain steady growth, with a record high in March 2024.
• Consumer groups argue for stricter lending rules to protect borrowers, while banks claim regulations are too tight.
• Rising interest rates may continue to exacerbate mortgage hardship cases in 2024.