THE banking regulator is alert to mortgage stress as interest rates rise and borrowers face a looming deadline on cheap fixed-rate home loans, but won’t ease the rules.<\/p>\n
Refinancing a mortgage has hit the highest level in 20 years, Australian Prudential Regulation Authority, or APRA, chair John Lonsdale said on Wednesday.<\/p>\n
There was plenty of competition and no regulatory impediment to borrowing, he told a senate estimates committee.<\/p>\n
But Lendi Group said a significant number of first-home buyers are in “mortgage prison”, with one in 10 owning less than 10 per cent of their home, which limits their ability to refinance.<\/p>\n
Many first-home buyers will roll off their ultra-low fixed rate mortgage and onto a rate that carries the full weight of Reserve Bank interest rate rises.<\/p>\n
Mr Lonsdale acknowledged some borrowers may have fewer options for refinancing their existing loan but he said the buffer required for qualifying for a mortgage would remain in place.<\/p>\n
Currently, home buyers taking out a loan must be rated as able to meet repayments if interest rates were to rise by three per cent.<\/p>\n
“For some, the impact of rising interest rates may have resulted in less favourable serviceability results, others might be impacted by declining housing prices or changed personal finances,” he said.<\/p>\n
Where a bank could identify the person as a “good borrower” they should still lend, he said.<\/p>\n
Supported by strong risk-weighting for mortgages, APRA expects Australia to remain free of contagion from banking collapses elsewhere.<\/p>\n
“The Australian financial system remains very strong, very stable, very resilient,” Mr Lonsdale said.<\/p>\n
Recent stresses for European and United States banks have highlighted “new complexities and challenges,\u201d he said.<\/p>\n
“There are “linkages and there are lessons… we are in the risk business.”<\/p>\n
Globally, regulators are also watching the speed at which savings can exit a failing bank – in March it was within hours.<\/p>\n
The stability and viability comes down to the people running these banks, the regulator said.<\/p>\n
Mr Lonsdale said he had met with the boards of three major Australian banks in recent weeks and reminded them of how events unfolded in March when several US banks failed.<\/p>\n
“I can tell you all of them are very alive to that,” he said.<\/p>\n
Australian banks are linked to international markets and pay close attention to fragility elsewhere, as does APRA, he said.<\/p>\n
But all Australian banks are in front of their funding requirements, he added.<\/p>\n