Aussie home prices and RBA concerns in the news overnight with this in the Wall Street Journal (gated): Australian Central Bank Frets Over Home Loans
In brief:
- In the Minutes of the October board meeting the RBA stressed the importance of maintaining rigorous standards on loans to property investors
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The RBA is concerned that with the climb in house prices this year, and the surge in investor borrowing (about 50% of mortgage lending is now going to investors) to fund property investment (don’t say ‘speculation’, K?) – that a sudden weakening in house prices will lead to borrower stress and have an impact on the economy.
It does seem likely that some form of macroprudential tool will be introduced (Barclays says this will likely delay the need for an interest rate hike), perhaps by the end of 2014. I agree with Barclays that doing so will delay any interest rate hike.
ps. Last week there was some market chatter about that the next move in rates from the RBA would be a rate cut … and market pricing did swing that way. With the global economic jitters seemingly calming so far this week, I expect such chatter to die down.
