HIA calls for ‘independent oversight board’ for APRA

In a submission to the Senate inquiry into the financial regulatory framework and home ownership, the Housing Industry Association (HIA) has highlighted how over a decade of additional costs has restricted competition among banks and made it increasingly difficult for them to lend to first home buyers.

HIA’s chief economist Tim Reardon said that while zero mortgage delinquencies is an unattainable and undesirable goal for the Australian Prudential Regulation Authority (APRA), home buyers have faced more than 10 years of restrictions that have reduced competition in the lending market, particularly for first home buyers.

“Mortgage arrears in Australia remained exceptionally close to zero through the GFC and the pandemic, but regulators continue to impose additional constraints on lending, competition among banks and restricting housing supply,” Reardon said.

In recent statements, the Reserve Bank acknowledged that despite pressures on household budgets, almost all borrowers have been able to continue to service their debts.

While housing and personal loan arrears have increased since late 2022, they remain below pre-pandemic levels.

“Overall, less than 1 per cent of all housing loans are 90 or more days in arrears, and less than 2 per cent of highly leveraged borrowers – the group of households most at risk – are in arrears,” Reardon said.

“Every home build in Australia is built with the support of a stable and reliable financial sector. It is a cornerstone of a stable economy and necessary for the building industry.”

However, he said that ongoing regulations have forced banks to eliminate much of the flexibility and competition in the mortgage market that once made home ownership accessible, particularly for first home buyers.

“This ‘belt and braces’ approach to macro-prudential restrictions is needlessly restrictive and increasingly limits lending only to those that already own at least one home, pursuing financial system stability at the expense of first home buyers,” Reardon said.

He emphasised the importance of recognising home ownership as a key objective for Australian households.

“Banks should be making the decision on who is able to service a mortgage, not the Australian Government. Banks are well placed to make this assessment and are protected from delinquency through mortgage insurance,” Reardon said.

Reardon proposed that regulators target a rate of mortgage arrears of between 2 and 3 per cent, or double the current rate, to prioritise home ownership as well as financial system stability.

“Allowing more first home buyers to access a loan doesn’t create demand for homes or increase house prices. It should allow more households to move from renting to home ownership, but it does not materially change the balance of supply and demand in the established house market,” he said.

He also said that the volume of apartments commencing construction is now around half of the volume commenced prior to the APRA and ASIC interventions.

“The regulatory system is in place to ensure that the financial system serves the needs of the Australian people. Australians expect the financial system to facilitate home ownership for all, not just those who regulators consider ‘worthy’,” Reardon said.

[RELATED: The opportunities that have kept arrears from skyrocketing]

Adrian Suljanovic is a journalist at Broker Daily with more than two years experience reporting on all facets of the third party distribution channel.

Adrian has written for a range of business and finance titles including IFA, Investor Daily and Lawyer’s Weekly before joining the mortgages team in 2022.

He graduated from the University of Wollongong in 2021 gaining a Bachelor of Communication & Media with a major in Digital & Social Media.

E-mail Adrian at: This email address is being protected from spambots. You need JavaScript enabled to view it.