Author: Larry Schlesinger
Australian Financial Review
   Mortgage Choice CEO John Flavell says there is plenty of funding in the market to keep housing investors going, even if the major banks are forced by the prudential regulator to cut back lending to this rampant sector.   
 Key points

   Repercussions of the major banks restricting lending to investors are questioned.

   Tougher rules could hurt renters, warns mortgage group chief.

   Mortgage Choice CEO John Flavell says there is plenty of funding in the market to keep housing investors going, even if the major banks are forced by the prudential regulator to cut back lending to this rampant sector.


There's enough headroom from other lenders to absorb the shortfall if the [major] lenders step back a little," he said. "There are other financiers who 


don't have caps, while some bank lenders are not growing at a rate requiring them to pull back.



"We are not seeing slathers of people [with investor lending] requirements that can't get access to funding."

   Mr Flavell's comments follow The Australian Financial Review reporting that a special regulatory working group backed by federal Treasurer Scott Morrison and including representatives from ASIC, APRA and the Reserve Bank of Australia would look to shortly impose tougher lending rules on the 
banks.

   These could include possibly halving the current investor lending growth limit of 10 per cent, substantially lifting interest rates, removing riskier products like interest-only loans and tightening borrowing requirements.

   Regulators have been prompted into action after house prices continued to soar in Sydney and Melbourne fuelled 
by a surge in lending to investors, which is up 27.5 per cent over the past year according to official figures, including a big 4.2 per cent increase in January.


   Mr Flavell, who previously headed up third-party banking at NAB, also questioned the repercussions of the major banks restricting lending to investors: "If the underlying demand is still there, you will create pressures at other points of the market if you squeeze too hard. There could be a shortage of rental stock and a spike in 
rents so these renting will feel more pain. The people in greatest stress are those who are renting."

   He said any changes to investor lending needed to be gradual rather than as "shocks" or "jolts" and suggested that talking down the market, often referred to as "jawboning" could be enough to take the heat out of it.

   "ËœThe realistic expectation is that the 
cost of money, with US Federal Reserve raising rates twice, is that it will get a little more expensive. This could take some of the pressure out of the system," Mr Flavell added.

   Mortgage Choice brokers settled $6.4 billion of home loans in the December half-year with the four major banks plus St George (part of Westpac) and BankWest (part of Commonwealth 
Bank) funding 65 per cent of these loans.

   The latest lending data from listed mortgage broking aggregator AFG showed borrowers were increasingly turning to non-major lenders.

"Flows to the non-majors are increasing quarter on quarter and are up to 35 per cent of our flows," said AFG interim CEO David Bailey.
Posted on: 27-Mar-2017