Housing Loan

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<p>Lending finance was shaping higher again by July, back up to $71.6 billion in trend terms, to be +6.7 per cent higher than a year ago, and getting pretty close to the highs of 2015.</p>
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<br><div>Commercial lending to businesses picked up, which is generally seen to be a good sign, while housing lending to owner-occupiers hit a record high. </div>
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<br><div>Personal lending commitments are tracking back down at levels not seen since 2002.</div>
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<div>This was mirrored by data elsewhere, with the Reserve Bank's statistical tables showing average credit card balances at their lowest level in nearly a decade. </div>
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<br>This does not fit the stretched household budgets theme.<br><br><div><strong><span style="text-decoration: underline;">Investor juggernaut slowed</span></strong></div>
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<div>Property investment loans are being successfully slowed by regulatory measures, and this is now filtering through into the rolling annual data at the state level. </div>
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<div>Interestingly the credit squeeze may be impacting the states that were already weak more keenly, rather than New South Wales and Victoria, though lending to investors is set to slow across the board. </div>
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Elsewhere, investor loans are rolling over in the nation's capital.</div>
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<br>And in Darwin, err, yikes.</div>
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<br><div><strong><span style="text-decoration: underline;">The wrap</span></strong></div>
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<div>Overall, this was a positive result given the lift in commercial lending to business, while in the property market, lending continues to shift from investors to homebuyers.</div>
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<div>I had a meeting with the brilliant Jonathan Tepper of Variant Perception this week - a considerably smarter fellow than you or I - and it was interesting to compare notes on where Variant sees Australia's economy heading.</div>
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<div>While VP's research reports are confidential to subscribers, their leading index has rolled over on Australia's economy, a major driver of this being the coming downturn in residential construction.</div>
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<br>Westpac's leading index has followed a remarkably similar trend. </div>
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<div>Residential construction made a very positive contribution to the economy is 2016, but by 2018 Westpac sees this as becoming an equivalently significant drag (and although non-residential building has been picking up, this is expected to be less labour-intensive. </div>
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<div>Job advertisements figures suggest that hiring will remain solid over the next 6 months, but it wouldn't be a shock if rate cuts are back on the agenda in 2018 especially after a weak inflation result for Q4 is released to the market early next year. </div>
<p class="p1"><span class="s1">PETE WARGENT is the co-founder of <a href="https://allenwargent.com/" target="_blank"><span class="s2">AllenWargent</span></a> property buyers (London, Sydney) and a best-selling author and <a href="https://petewargent.blogspot.com/" target="_blank"><span class="s2">blogger</span></a>.</span></p>
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<p class="p2"><span class="s3"><em>His latest book is </em><a href="https://www.bigskypublishing.com.au/Books/General-Interest/Four-Green-Houses--and-a-Red-Hotel/1015/productview.aspx" target="_blank"><span class="s2"><em>Four Green Houses and a Red Hotel</em></span></a><em>.</em></span></p>
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pwargent-M4siyDbqQY

Property lending finance picks up: Pete Wargent

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<p>Interest-only home loans could be "Australia's sub-prime”, an institutional investment fund has warned in spite of the recent steps by regulators such as the APRA to tighten lending criteria by banks.</p>
<p>Mortgage loans to young families, professionals and other over-extended borrowers that are to more than six times their household incomes could wipe out 20 percent of the major banks' equity base, according to an article in The Australian Financial Review based on institutional investment fund JCP Investment Partners’ study. </p>
<p>Official estimates of average household indebtedness are depressed by the sizeable number of mortgages that are effectively full paid off, says the study.</p>
<p>The Melbourne-based fund said Irish-style housing losses for the bigger-than-recognised pool of riskier borrowers could wipe out half of the banks' equity capital.</p>
<p>Further, it warned that interest-only loans could become "Australia's sub-prime”, in a reference to the US sub-prime mortgage crisis that sparked the global financial crisis in 2008-09.</p>
<p>As regulators crack down on interest-only lending and the budget decision to introduce a tax on banks that will total $6.2 annually drives up the cost of loans, "only time will tell if such households can afford the mortgages they have”, the note said.</p>
<p>Recently, Reserve Bank of Australia Governor Philip Lowe echoed a similar sentiment, saying rising household debt had made the economy more vulnerable, and that it was unclear how stretched consumers might behave in a crisis.</p>
<p>It also follows a review by Australian Prudential Regulation Authority chairman Wayne Byres of bank capital requirements for housing exposures. APRA has clamped down on <a href="https://www.urban.com.au/expert-insights/finance/68067-apra-tightens-interest-only-lending-rules" target="_blank">interest-only loans</a> in a bid to cool the hot east coast property market.</p>
<p>It said interest-only loans must be restricted to 30 per cent of new residential mortgage loans. Interest-only lending represents nearly 40 percent of the stock of residential mortgage lending by banks.</p>
<p>Among the biggest concerns is the impact of households not being able to service their loans, for instance, as borrowing costs are reset higher or those with interest only mortgages are forced to repay the principal as well.</p>
<p>That creates a negative feedback loop – experienced by Ireland after the financial crisis – in which stressed borrowers slash their spending, in turn crunching the economy, driving up unemployment and adding to downward pressure on house prices.</p>
<p>"The long virtuous housing wealth cycle could easily transition to a viscous cycle," said JCP. "Smaller mortgages to deleveraging, flat to decreasing house prices and exuberant to melancholic animal spirits will likely expose much bad lending behaviour."</p>
<p>About half of all the nation's mortgage debt was in the hands of borrowers whose debt was more than four times larger than their gross income, said senior researchers Matthew Wilson and Craig Shephard.</p>
<p>The same borrowers had paid off less than half of their loans, the team found, based on data from several official and private sector sources that adjusted for changes in incomes and the collateral values of their homes.</p>
<p>The average loan-to-income ratio of these heavily indebted households was 6.4, or more than double the old banking "rule of thumb" that mortgage managers didn't lend more than three times a household's income "unless they were doctors".</p>
<p>Regulators might be taking false comfort from the large number of mortgages that were effectively fully paid off, as those households were flattering conventional system-wide measures of household indebtedness.</p>
<p>JCP has identified three classes of borrowers who posed the most risk to the system: professionals on high incomes who had borrowed big, young "pretenders" who had stretched themselves to get into property, and young families burdened with rising living costs.</p>
<p>Almost a third of the most highly geared borrowers were professionals with pre-tax incomes of more than $250,000. While they accounted for just 2 percent of total households, they held 17 per cent of mortgage debt, and an average mortgage worth $1.6 million. Half of these borrowers had an investment property loan.</p>
<p>Other young households – dubbed "pretenders" because they had taken on large debts relative to their incomes – were also at risk. This group tended to have average incomes of $110,000 but an average mortgage that was an "eye-watering" 7.4 times larger at $840,000.</p>
<p>The last group, young families, were slightly better placed with average incomes of $80,000 and average mortgages of $420,000.</p>
<p>While they are a small part of the loan book, their household stress could be high because there were "question marks surrounding treatment of expenses in home loan applications, and generally high costs of living,” it said.</p>
<p>"The old LTI ratio [of three times income] has left the banking lexicon exposing a risk that we may have over-capitalised incomes and hence over-extended credit into certain cohorts."</p>
<p>JCP estimated that 50 percent of the equity of Australian banks would be wiped out by soured loans to these high-risk borrowers.</p>
<p>Using less extreme loss assumptions, the banks could have 20 percent of equity wiped out, it said.</p>
<p>JCP used Ireland as a comparison because it experienced a sharp housing correction in 2008 because it was caught in the middle of the Anglo Saxon system of easy credit provision and the Roman system of strong creditor's rights.</p>
<p>In the more conservative scenario, JCP assumed that a 7.5 percent probability of a default and a 40 percent loss would result in the banks losing $24.2 billion on these loans to the high-risk cohort and $28.2 billion in total. That equated to about 17 percent of the $161 billion equity capital base of the banks.</p>
<p>Australians have continued to borrow at an alarming rate as owner-occupied loans grew at a 6 percent annual compounded growth rate, while investor loans grew by 8 percent.</p>
<p>Interest-only loans have increased from 30 per cent of all mortgage credit to 42 percent.</p>
<p>The fund identified several potential catalysts, including the corporate watchdog's legal action against Westpac over responsible lending.</p>
<p>That might prove to "the seemingly small shock" that forced lenders to request more information. That, in turn, could reduce the borrowing capacity of future buyers.</p>
<p>Another catalyst could be further the steps taken by concerned regulators to reign in a dangerous build up in household debt.</p>
<p>"Credit fuels a bubble, and its ultimate rationing and eventual withdrawal deflates it."</p>
<p>JCP's research adds to concerns of regulators such as APRA's Byres, Australian Securities and Investments Commission chairman Greg Medcraft and Dr Lowe.</p>
<p>The 18-year-old Melbourne-based investment company manages money for large institutions and is one of three Australian equities managers appointed by the Future Fund.</p>
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jonathanchancellor-7SQnKwU6yx

High-risk interest-only loans could be Australia's 'sub-prime', warns institutional fund

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<p>GUEST OBSERVER</p>
<p>The March housing finance approvals report was largely in line with expectations.</p>
<p>The number of approvals for owner occupier loans dipped 0.5 percent/mth but were flat ex refi. The consensus forecast was for a flat result. Approvals ex refi were up 3.8 percent yr. The value of investor loans rose 0.8 percent after a sharp 5.7 percent pull back in Feb, annual growth coming in at 14.2 percent/yr.</p>
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<p>All up the data was largely as expected – note that the latest round of macro prudential tightening was only announced in late March with impacts likely to come through in Apr-Sep. That said, the more moderate reads on investor loans in Feb-Mar suggest lenders were already reining activity in this segment to keep within APRA’s existing 10 percent limit on investor credit growth (i.e. growth in the total stock of loans).</p>
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<p>The detail showed, ex refi, a solid gain in owner occupier approvals in NSW (+2.9 percent/mth) offset by falls in the other major states ranging from –1.3 percent/mth in Vic and –1.8 percent/mth in SA to –3.4 percent/mth in Qld and –4.4 percent/mth in WA. Annual growth remains positive for all states except WA.</p>
<p>Construction-related finance approvals posted a solid 4.3 percent/mth rise led by a 10 percent bounce in finance for the purchase of newly built dwellings (which includes apartments and ‘off the plan’ purchases). This segment showed a similar sized fall in Feb.</p>
<p>The total value of loans ex refi rose 1.3 percent, partially reversing Feb's 2.2 percent fall. Annual growth edged up to 10 percent.</p>
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<p><img src="https://www.urban.com.au/images/2017/05/15/Screen%20Shot%202017-05-16%20at%208.41.36%20AM.png" alt=""></p>
<p>More recent data from weekly auction activity suggests housing market conditions steadied a touch in Apr-May after cooling off earlier in the year from a very strong finish to 2016. Auction volumes remain high although turnover via other channels looks to be very weak. Note that these measures only provide meaningful gauges for the Sydney and Melbourne markets.</p>
<p>Looking ahead, the exact impact of new regulatory guidelines is unclear. The specific limit for investor credit growth was unchanged at 10 percent although lenders were instructed to keep growth 'comfortably below' the target. The main new measure was a 30 percent limit on the 'interest only' share of new loans (currently running at 38  percent overall and 65 percent of investor loans), particularly those with high LVRs.</p>
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<p>Lenders have responded with increased rates on both investor and owner occupier loans with larger increases for 'interest only' products (+30bps on average for investor loans, +15bps for owner occupier loans). It remains to be seen how borrowers react but the mix suggests both owner occupier and investor finance approvals will be impacted, perhaps with some 'product switching' refinance flows in the mix as well. </p>
<p class="p1"><span class="s1"><em>Matthew Hassan is senior economist with </em><a href="https://www.westpac.com.au/"><span class="s2"><em>Westpac</em></span></a><em>.</em></span></p>
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Matthew_Hassan-HHWHptmrw4

Approvals for owner occupier loans dip: Matthew Hassan

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<p><img src="https://counter.theconversation.edu.au/content/73842/count.gif?distributor=republish-lightbox-advanced" alt="The Conversation" width="1" height="1"></p>
<p>GUEST OBSERVER</p>
<p>The “bank of mum and dad” is helping young Australians with more than just their housing aspirations.</p>
<p>New analysis of data on children receiving an inheritance or cash payment from their parents has found they are more likely to be involved in business startups, financial risk-taking and entrepreneurial ventures, and receive other benefits to those without wealthy parents.</p>
<p>The bank of mum and dad is an expression coined to describe parents generously helping their children to get onto the home ownership ladder. We already know that parental transfers are helping Gen X and Gen Y children break into home ownership, in a market considered unaffordable by international standards.</p>
<p>While some are angered by the growing intergenerational wealth divide between the millennials and their baby boomer parents, estimates from the Household, Income and Labour Dynamics in Australia (HILDA) survey show many young people are benefiting from the wealth of their parents.</p>
<p>Between 2002 and 2012, 1.8 million Australians received an inheritance on one or more occasions. There was an average transfer of A$95,000 per beneficiary over the period. An even higher number (5.8 million) received cash transfers from surviving parents. These gifts averaged A$9,000 per recipient.</p>
<p>Housing assets remain the most important component of households’ wealth portfolios. The majority of households will therefore directly or indirectly draw down on housing wealth to finance monetary gifts to others while they are still alive. The family home is also typically the largest asset bequeathed when parents pass on.</p>
<p>Moreover, booming real house prices have boosted inheritances. At the same time, flexible mortgages have enabled parents to dip into their housing wealth to finance cash gifts to their children.</p>
<p>More than a leg up the housing ladder</p>
<p>A recent Australian Housing and Urban Research Institute report has shed new light on how financial gifts from parents help shape young people’s economic opportunities.</p>
<p>The study matches every person benefiting from an inheritance or parental cash transfer to a “control” person who is not a beneficiary, but has otherwise similar personal characteristics.</p>
<p>We found that the bank of mum and dad is helping young Australians with more than just their housing.</p>
<p>Intergenerational transfer beneficiaries are more likely to hold a bachelor’s degree than non-beneficiaries. Among those who receive cash payments from their parents, 29% hold a bachelor’s degree compared to 21% of the control group who do not receive such transfers. Bequest recipients have double the average bank deposit account balance of the matched controls. These larger financial holdings can be used to buffer income shocks, and as collateral to relax borrowing constraints.</p>
<p>Beneficiaries might therefore be willing to take more risks. They are also better positioned to borrow and finance business startups that might not otherwise get off the ground. These ideas are supported by the data.</p>
<p>A higher percentage of those enjoying access to the bank of mum and dad have set up their own business. 22% of heirs to a bequest are self-employed. In comparison, only 16% of the matched controls were self-employed. Similarly, 17% of those receiving cash payments from their parents are self-employed, compared to 11% of the matched controls.</p>
<p>The findings suggest that the bank of mum and dad could play a role in lifting economic growth through multiple channels. These include business startups, financial risk-taking and entrepreneurial ventures.</p>
<p>Bridging an intergenerational divide or widening an intra-generational gap?</p>
<p>It seems the bank of mum and dad is recycling large amounts of housing wealth to the next generation through intergenerational transfers; and it is an increasingly important pillar supporting educational, housing and business opportunities. However, this is a “leg up” that only benefits those fortunate enough to have parents that are able and willing to transfer wealth.</p>
<p>The business opportunities, educational gains and home ownership status that these transfers promote will create a growing divide among younger Australians. Those whose parents own a home are able to take advantage of a wider set of opportunities than others.</p>
<p>As the home ownership dream fades for growing numbers of Australians, this divide will become more conspicuous. Life time renting is a prospect that many Gen X and Gen Y parents are having to contemplate. Unless Australian governments reverse the decline in home ownership, their children will in turn be bypassed by the intergenerational circulation of housing wealth.</p>
<p>These concerns should provide added impetus as governments strive to improve housing affordability, and restore the home ownership society older Australians take for granted. If our governments fail in this regard we could very well witness further entrenchment of inequality in decades to come.</p>
<p><a href="https://theconversation.com/profiles/rachel-ong-113482" target="_blank">Rachel Ong</a> is Deputy Director, Bankwest Curtin Economics Centre, Curtin University.</p>
<p><a href="https://theconversation.com/profiles/gavin-wood-113723" target="_blank">Gavin Wood </a>is Professor of Housing, RMIT University.</p>
<p><a href="https://theconversation.com/profiles/melek-cigdem-bayram-181846" target="_blank">Melek Cigdem-Bayram </a>is Research Fellow, RMIT University.</p>
<p>All are authors for The Conversation.</p>
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jchancellor-FAypfDUnLy

Not everyone wins from the bank of mum and dad

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<p class="p1"><span style="font-size: 12.16px;">Bankwest has said it will not take into account negative gearing benefits when determining loan eligibility serviceability.</span></p>
<p>It means investors will not be able to secure as much in any loan application. It also could apply to existing loans.</p>
<p>It follows on from last week’s announcement when the Commonwealth Bank subsidiary said it was not accepting new applications for <a href="https://www.urban.com.au/expert-insights/finance/65099-loans-com-au-woos-investors-amid-cba-bankwest-moves-to-shun-refinancing" target="_blank">refinancing of investment properties</a>.</p>
<p>BankWest has confirmed it will remove the tax advantages of negative gearing when determining whether or not applicants are eligible for investor loans, said a report in <em>The Real Estate Conversation</em>.<span style="font-size: 12.16px;"> </span></p>
<p>The move would mean investors can borrow less from the lender. Also, as another consequence Bankwest would likely be writing fewer investment loans.</p>
<p>The Commonwealth Bank is expected to announce similar moves.</p>
<p>There was speculation in the media that both BankWest and the Commonwealth Bank were close to the 10 per cent growth cap for investor loans set by the Australian Prudential Regulation Authority.<span style="font-size: 12.16px;"> </span></p>
<p>The report cited an <em>Australian Financial Review</em> article quoting Mark Chapman, a director of tax accountants H&amp;R Block, that the rule change would affect existing borrowers.</p>
<p>"The impact of Bankwest's decision on new borrowers is not too bad – they can just borrow through another bank," he said. “But for existing BankWest borrowers, the change is retrospective.”</p>
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Bankwest will ignore negative gearing tax benefits when calculating investor loans

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<p>GUEST OBSERVER</p>
<p>ABS figures for November 2016 demonstrate strength in lending for new housing.</p>
<p><span>Lending for new housing - to both owner occupiers and investors - turned in strong results in this latest ABS update.</span></p>
<p><span>The new home building </span><span>sector will continue to provide strong support to the broader Australian economy through the </span><span>first half of 2017.</span></p>
<p><span>The number of owner occupier loans for the construction or purchase of a new dwelling increased by 2.7 per cent in November 2016. Meanwhile the value of lending for construction investment reached a new record on a moving annual basis. </span></p>
<p><span>The new home lending cycle has peaked, but the November results confirm that the elevated volumes of lending we have seen over the last three and a half years remained in play as 2016 neared an end</span><span>. </span></p>
<p><span>T</span><span>hat’s a tick in the box for the Australian economy</span><span>.</span><span><br></span></p>
<p><span>As has been typical throughout this cycle, the profile for new home lending varies widely between states and territories</span><span>. </span></p>
<p><span>Looking beyond just today’s update, it </span><span>is not surprising that New South Wales and Victoria are faring the best overall.</span><span><br></span></p>
<p><span>Compared with 12 months ago, the number of loans for construction and purchase of new homes increased in five out of eight states and territories in November 2016. The fastest annual growth occurred in Tasmania (+28.4 percent), followed by Queensland (+20.0 percent), South Australia (+11.0 percent), New South Wales (+9.9 percent), and Victoria (+9.6 percent). The number of loans for new housing fell in November in the Northern Territory (- 57.9 percent), the Australian Capital Territory (-23.3 percent), and in Western Australia (-9.5 percent). </span></p>
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<p><em>Harley Dale is chief economist at the Housing Industry Association and can be contacted <a href="https://hia.com.au" target="_blank">here</a>.</em></p>
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New house lending turns in strong result: HIA's Harley Dale

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<p>APRA chairman Wayne Byres' Opening Statement to the House of Representatives Standing Committee on Economics</p>
<p>This is a hearing into APRA’s 2015 Annual Report, which I hope provides a clear and transparent account of our activities. But since many issues discussed in that Report continue to have currency, and the Committee will also want to discuss more contemporary issues, I plan to use my opening remarks to provide an update on a few key areas of APRA’s work since that report was published. More detail will, of course, be provided in our 2016 Annual Report, which will be tabled shortly.</p>
<p><strong>Regulatory framework</strong></p>
<p>APRA’s regulatory agenda in 2016 has been heavily influenced by the recommendations of the Financial System Inquiry (FSI). In particular, we continue to improve the resilience of the banking system to adversity, building on the lessons learned from the financial crisis. In our bailiwick, this has included measures to strengthen bank capital, bolster the stability of bank funding, and facilitate a simpler and more resilient securitisation market. </p>
<p>All of these initiatives are designed to improve the resilience of banking institutions. But even with more resilience, preparing for a possible crisis involving one or more regulated institutions with serious threats to their immediate viability is also a wise investment. We therefore welcomed the Treasurer’s recent commitment to pursue proposed legislative improvements to the statutory toolkit for crisis management, as recommended by the FSI, as a matter of priority. We would also appreciate this Committee’s support when these proposals come before the Parliament. </p>
<p><strong>Housing lending standards </strong></p>
<p>Our supervisory work on housing lending standards has remained a high priority in 2016. There is no shortage of competition for the business of home loan borrowers, but we are keen to see the industry’s competitive instincts directed towards pricing, product features and customer service, rather than pursuing market share by reducing the quality of loans written. Therefore, the goal of our recent work has been to reinforce – and in some areas improve - sound lending standards for housing, particularly in relation to the manner in which lenders assess the capacity of borrowers to service their loans.</p>
<p>In response to our attention, we believe the industry has appreciably improved its lending standards: for example, all material lenders are now assessing borrower serviceability using interest rate buffers of at least 2 percent, and a minimum rate of at least 7 pe cent, and some of the overly generous assumptions in affordability models have been tightened up. We continue to monitor the evolving risks in the property market, and are working to have improved standards firmly embedded into industry practice, so they are not eroded away over time. </p>
<p><strong>Risk culture</strong></p>
<p>For the past couple of years, we have given greater attention to the risk culture within regulated institutions. Risk culture is, in simple terms, the way in which the organisation’s culture shapes its attitude to risk-taking and risk management. Assessing risk culture is no easy task. But if an organisation has a poor attitude to risk-taking and risk management, it can ultimately threaten an institution’s financial viability. We saw examples of poor risk culture at the heart of many failures that occurred internationally during the GFC; before that, the demise of HIH Insurance was an example closer to home.</p>
<p>It is important to note that prudential and conduct regulators – that is, APRA and ASIC – both have a legitimate interest in the culture within financial institutions, but that our respective interests stem from different underlying objectives. ASIC's focus on culture is from the perspective of ensuring fair outcomes for customers and investors. APRA’s focus on risk culture reflects our prudential mandate - that as a result of undesirable behaviours and attitudes towards risk-taking and risk management, the viability of an APRA-regulated institution itself - and in severe cases, financial stability – might be threatened. While we start with different objectives, our shared interest means APRA and ASIC need to work collaboratively on culture-related matters - and we are doing that. </p>
<p>APRA’s work over the past year or so has focussed on how Boards assess the risk culture within their organisation, given the introduction of specific prudential requirements in this area from January 2015. We will very shortly publish an information paper on industry activity in relation to understanding and assessing risk culture. In the year ahead, we will continue to refine our approach and methodologies for making assessments of risk culture within regulated institutions, and be looking more closely at the influence of remuneration arrangements on that culture. </p>
<p><strong>Life insurance claims review</strong></p>
<p>As the Committee knows well, there have been serious allegations of inappropriate and unfair treatment of a number of claimants by The Colonial Mutual Life Assurance Society Limited, trading as CommInsure. While ASIC is dealing with specific customer cases, APRA takes a close interest in such matters, given they can provide important insights into the strength of an institution’s governance, risk management and risk culture. Therefore, working alongside ASIC, we commenced three streams of work:</p>
<ul>
<li>We engaged with the Board and senior management of CommInsure to gain assurance over the robustness and completeness of the independent reviews commissioned to investigate the allegations, and to ensure a focus on stakeholder and community expectations through this process.</li>
<li>We met with the whistleblower that brought the CommInsure matters to public attention, and are considering whether the whistleblowing provisions in the Life Insurance Act 1995, which are designed to prevent the identification and victimisation of whistleblowers, have been adhered to in this matter. </li>
<li>We wrote to the Boards of all active life insurers to seek information about the effectiveness of their governance and oversight mechanisms for matters such as claims handling, benefit definitions, rejected claims and customer complaints. We similarly wrote to a selection of superannuation trustees, as some of the claimants that had experienced unacceptable outcomes were members of group risk schemes via their superannuation funds. Summaries of the key themes from APRA’s analysis of responses to these information requests were released earlier this week.</li>
</ul>
<p>Our work in each of these streams is ongoing.</p>
<p><strong>Concluding remarks</strong></p>
<p>Underlying all of the work I have just spoken about is our firm conviction that a strong, stable and competitive financial sector is essential for the ongoing prosperity of the Australian community.</p>
<p>Importantly, we do not see enhanced safety as necessarily requiring a trade-off with competition. Rather, the two are complementary since only sound financial institutions will be able to support their customers – both existing and new – through good times and bad. Australia needs regulated institutions that make an adequate return for their owners such that they remain attractive to new investment, while at the same time providing products and services to their customers that offer value for money and perform consistently with expectations.</p>
<p>Business models and products that only support the community when times are good do not provide the lasting benefits of competition. Put simply, only sound institutions operating with the interests of their full range of stakeholders in mind, and with a long term perspective, are able to provide real and sustainable service to the community. Through our activities, we hope we are helping to shape the financial system in that direction.</p>
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Industry reacting to APRA's influence on housing loan lending standards: Wayne Byres

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<p>The 30 or more day delinquency rate for Australian prime residential mortgage-backed securities (RMBS) rose to 1.53 percent in the quarter ending 30 June 2016, up from, from 1.50 percent at 31 March 2016, according to research from Moody's.</p>
<p>The Australian RMBS Indices Q2 2016 from Moody's found delinquency rates increased for both prime RMBS issued by major banks and regional authorised deposit-taking institutions (ADIs).</p>
<p>For major bank issuers, the 30+ day delinquency rate increased to 1.46 percent at 30 June 2016 from 1.44 percent at 31 March 2016. For regional ADIs it rose to 2.16 percent from 2.01 percent over the same period. </p>
<p>The total repayment rate for prime RMBS was 24.74 percent at 30 June 2016, lower than the 12-month average of 25.05 percent.</p>
<p>The report suggests Australian prime RMBS delinquencies and defaults will continue to rise through the remainder of 2016, owing to Australia’s below-trend nominal economic growth.  </p>
<p>"Australia-wide, housing affordability — as measured by the average share of income needed to make monthly mortgage loan repayments — deteriorated in Q2 2016 compared with the previous quarter, owing to higher home prices," the report noted.</p>
<p>"Housing affordability improved in Perth and was unchanged in Sydney over Q2 2016." </p>
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30 day prime residential mortgage-backed securities delinquency rate rises

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<p>Ms Jianyong (Jenny) Mao, of South Brisbane, Queensland, has appeared in the Brisbane Magistrates' Court on a charge brought by ASIC of giving documents to a lender that were materially misleading.</p>
<p>ASIC alleges that in May 2011, Ms Mao caused documents, including banks statements and application forms which were materially misleading, to be given to a lender in support of a home loan application. ASIC alleges that the loan was subsequently granted on the basis of these documents.   </p>
<p>At a hearing on 18 July 2016, the matter was adjourned to 5 September 2016.</p>
<p>The Commonwealth Director of Public Prosecutions (CDPP) is prosecuting the matter.</p>
<h2><strong>Background</strong></h2>
<p>Ms Mao operated a home loan broking company, Diamond Lady Group Pty Ltd (Diamond Lady Group) which held an Australian credit licence from 2010 until 2014. </p>
<p>Ms Mao was charged by ASIC under section 33(2) of the <em>National Consumer Credit Protection Act 2009</em> in relation to her conduct while she was engaging in credit activity. Section 33(2) (the predecessor to s160D) makes it an offence for a person engaging in credit activities to give false or misleading information or documents to another person.</p>
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