Hitting the buffers
ANZ's Shayne Elliott lamented the highly restrictive lending buffers that remain in place, despite the interest rate cycle having essentially all but peaked.
This unnecessarily shuts many first homebuyers and many prospective landlords out of the housing market, and almost makes life hard for small businesses that want to borrow.
Source: The Australian
Landlords have been further discouraged from making long-term investment decisions by endless changes and tinkering to property and land tax rules, tenancy rights, and other proposed changes by Federal and state politicians.
Meanwhile, many parts of the country are suffering from a severe shortage of rental housing.
The ABS reported today that only 1.3 per cent of dwellings showed no signs of recent electricity use, which is a far cry from the 10 per cent vacancy rate often cited from Census nights (when in reality many of us are often travelling, either interstate or overseas).
In south-east Queensland there are no worthy remedies in sight, leaving politicians to take to social media every few days to effectively force some positive optics.
This week, for example, eight new dongas in Gympie...it's better than nothing, for sure, but it's not a sustainable solution for the housing shortage across SEQ.
Non-banks are now at lasty pushing the envelope a little in terms of allowing investors to test their feet in the market.
But realistically lenders such as Pepper Money are only a small part of the lending market and are not the first port of call for most borrowers.
Source: Eric Wu, Property Talk Australia
The general idea appears to be for tighter lending policies to work in tandem with monetary policy, but now the restrictive lending policies are causing more problems in the first homebuyer and rental markets than they are solving.
Former Reserve Bank of Australia economist Peter Tulip from the CIS has made this point about paternalistic policy settings regularly of late:
Thomas Naylor adds:
Overall, the 3 percentage points lending assessment buffer for new mortgage borrowers made sense when the cash rate target was at the zero lower bound.
However, the cash rate target is now 4.10 per cent - and investors are often borrowing at mortgage rates of 6 to 7 per cent.
As such, the buffers make far less sense and should be normalised.
