On Tuesday, The Housing Industry Association (HIA) said that households must have clear guidance on any potential changes they may encounter in home lending, especially now that housing markets in Melbourne and Sydney continue to weaken.

HIA Senior Economist Geordan Murray underscored that borrowers are still bothered with any potential increase in their borrowing costs albeit the steady cash rate. As it is known, the Reserve Bank of Australia (RBA) kept the official cash rate unchanged at 1.5%.

The sentiment of the industry group is rooted in various occurrences in the past, which burdened Australians in one way or another. First, after the Global Financial Crisis era, lenders have frequently modified home loan rates independently of movements in the official cash rate in order to ensure that their lending rates more accurately reflect their true cost of capital.

Recently, lenders have been squeezed by regulators, resulting in a degree of credit rationing and higher borrowing costs for investors and those wishing to borrow in interest only terms.

Further, HIA reiterated the consequences of APRA’s interventions.  “APRA’s interventions were appropriate at the time that they were implemented – acting to curb growth in risky lending and the by-product was to cool the housing market. The housing downturn now has its own momentum and does not need additional assistance from the regulator,” Murray said in a statement.

To illustrate the magnitude of the problem, he cited the figures from RBA that showed growth in housing credit to investors dropping to a new low, as well as the slowdown in owner-occupier lending growth.

“The housing market is now in a very different position to the time when APRA imposed the restrictions. We have already seen the speed limit on investor lending dropped but other restrictions remain. “

Murray urged the central bank and the sectors of the government to work hand in hand in order to rise above housing cycle turns successfully.

“It will be important for the RBA, APRA and the federal government to monitor developments in the housing market and ensure that we have appropriate policy settings to ride out the cyclical downturn smoothly,” he concluded.

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