Australia’s major banks have tightened underwriting rules for property investors amid growing fears of a housing bubble, after the Australian Prudential Regulatory Authority warned that Sydney’s housing bubble could destabilize the financial system.
Paying heed to the warning, Australia’s four major banks – Commonwealth Bank of Australia, Westpac Banking Corp, ANZ Banking Group and National Australia Bank – have raised the minimum down payment to 20% of the purchase price, having previously required only 5% money down. Stricter mortgage approval criteria have been introduced, and the banks are either not providing interest rate discounts on mortgages to property investors, or discouraging discounts.
Australia’s regulators still want the banks to take more steps to check the country’s runaway property price rises, particularly in Sydney, asking them to set aside more capital against mortgages. Sydney’s house prices have risen 40% over the past three years.
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Treasury secretary John Fraser warned last month that Sydney is "unequivocally" in a housing bubble, due to interest rates at historically low levels. "When you look at the housing price bubble evidence, it’s unequivocally the case in Sydney. Unequivocally," he said.
This article was republished with permission from Global Property Guide.