Council of Financial Regulators say short term housing market risks lessen

The Council of Financial Regulators (CFR) met to discuss financing conditions, the housing market, Cyber risk initiatives and the lending market.

During the meeting they said that growth in housing credit remains subdued overall, with credit to investors particularly weak.

Owner-occupier loan commitments and housing turnover in Sydney and Melbourne have picked up, suggesting that a strengthening in credit growth is likely.

Mortgage lending standards have been broadly unchanged recently.

Overall, near-term risks related to the housing market have lessened as housing market conditions nationally have improved.

Members discussed the potential for the current weakness in apartment construction to place upward pressure on prices in some cities over time unless construction picks up. They also discussed the tight credit conditions for small businesses and the reduced risk appetite by many lenders for lending to small business.

Concerning responsible lending new ASIC guidance will confirm that responsible lending requirements do not apply to loans made predominantly for business purposes, regardless of the type of security offered for the loan.

Council members stressed that the flow of credit is fundamentally important to the functioning of the Australian economy and discussed the concern that lenders' risk appetite for some types of lending may have swung too far towards caution.

The CFR met with representatives of the Department of Home Affairs and the Australian Cyber Security Centre (ACSC) to review the current cyber security environment. They also discussed key initiatives to improve cyber resilience, including the development of the Government's 2020 Cyber Security Strategy, and application to the financial sector.

Council agencies, the Department of Home Affairs and the ACSC will continue to cooperate to improve the preparedness of the financial sector.