He says it "de-values the broker proposition"
He told MPA that the move would introduce new clients to the Aussie broker channel
- 2018 Commercial Lenders Roundtable
- Top 10 Brokerages 2018
- 2018 Brokers on Aggregators
Mortgage lending restrictions would make sense if regulators wanted to curb the booking housing market, according to National Australia Bank chairman Phil Chronican. However, any move to slow lending would only impact prices temporarily, he said, since prices are being driven up by low supply and cheap lending rates.
In March, house prices rose at their fastest pace since the 1980s, according to a report by The Sydney Morning Herald. Chronican said that skyrocketing asset prices were the expected result of rock-bottom interest rates.
“We are running an extraordinarily accommodating monetary policy with interest rates at levels that none of us can remember, because they are completely unprecedented,” Chronican said during a speech to the Governance Institute in Sydney. “We shouldn’t be surprised that that’s going to show up in price inflation in some form or another. At the moment, we’re seeing that in asset price inflation – and it’s not just in real estate, we’ve seen financial assets as well.”
Chronican said that macroprudential policies would be a “rational response” if regulators wanted to continue getting the economic benefits of low rates without the spike in asset prices, the Herald reported.
“There are plenty of economies, particularly in economies like Singapore and New Zealand, where macroprudential policies have been brought in for short periods of time to take the head out of the market,” Chronican said. “And if that happens, then as I said, that would be understandable.”
However, Chronican said that these policies typically only worked for a short time. That’s because unregulated lenders may be exempt from these credit restrictions – and because macroprudential policies didn’t deal with the underlying shortage of inventory, the Herald reported.
Read more: Demand for new homes set to continue
Chronican argued that Australia faced a “critical moment in time” to enact policy reforms to increase business investment and productivity after the COVID-19 pandemic. He supported a return to skilled migration, but argued that it needed to be supported by investment in infrastructure and housing inventory, according to the Herald. NAB recently predicted house price growth of around 10% for this year.
“And I just point out that we’re seeing this strong house price growth at a time when Australia’s population growth is at record lows,” Chronican said. “You can imagine what the pressure is going to be like as migration is reopened in coming years.”
Ryan Smith is currently an executive editor at Key Media, where he started as a journalist in 2013. He has since he worked his way up to managing editor and is now an executive editor. He edits content for several B2B publications across the U.S., Canada, Australia, and New Zealand. He also writes feature content for trade publications for the insurance and mortgage industries.
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