More Australian Borrowers Turning to Nonbanks for Loans, Bendigo CEO Says
By Alice Uribe
SYDNEY--More Australian borrowers are turning to the nonbank sector to get home loans, with the banking sector feeling pressures on its ability to lend, Bendigo & Adelaide Bank Chief Executive Marnie Baker said.
Higher interest rates have led to tighter financial conditions across Australia's economy. At the same time, prospective homeowners are finding it harder to get a mortgage due to regulatory restrictions on how banks lend. Regulatory tightening has increased since the 2008-09 global financial crisis, prompting more stringent rules around banks approving credit cards or loans.
"I feel that we've got to a position as a banking industry where we are not lending as much as we could to people who are able to afford to put themselves into a house," Baker told a panel at the Australian Banking Association conference in Melbourne on Wednesday.
"I think we're seeing more people being forced into the nonbank sector, for housing. And that really concerns me."
Australia's banking regulator in December maintained the serviceability buffer for would-be mortgage holders at 3%, saying the current level for home-loan assessments provided adequate protection for new borrowers amid higher rates.
An Australian Prudential Regulation Authority provision that allows applicants with a good track record of paying a mortgage to fit into an "exception policy" was also maintained by the regulator.
Recent warnings from Australia's central bank have prompted some economists to highlight the risk that interest rates might be raised again, perhaps as early as August, if coming inflation data show no signs of improvement.
Still, across the Australian banking sector, mortgage arrears remain low by historical levels. Bendigo has witnessed a slight uptick in the 90-day delinquency rate, a measure of serious delinquencies, but Baker said 86% of its home loans have a buffer, with 41% of those ahead of payments by one year.
National Australia Bank Chief Executive Andrew Irvine said the Australian major lender was concerned about what would happen when low fixed-rate home loans ran off, but customers had generally been able to meet their debt obligations.
"I think what we've found is consumers have been able to juggle," he told the ABA conference on the same panel.
For Irvine, the housing stock posed more of an issue than banks' ability to provide mortgages to customers, and he sees this as a major policy issue.
"We've got to fix the supply side," he said, amid higher migration and a decline in household size.
"There's a plethora of things that need to be addressed from planning, permission to taxation, to new methods of housing."
Write to Alice Uribe at alice.uribe@wsj.com
(END) Dow Jones Newswires
June 25, 2024 22:46 ET (02:46 GMT)
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