A chief economist believes that further measures to curb investor lending could be only months away.
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APRA pressure may push interest rates up for investors
Recently released figures from the Australian Bureau of Statistics (ABS) indicate that lending to investors grew by 21 per cent in the year ending November 2016.
According to ANZ’s Quick Reaction regarding the results, this is the fastest growth since the implementation of APRA’s macroprudential regulations in 2015.
Speaking to Mortgage Business, AMP Capital chief economist Shane Oliver remarked that he was “surprised” that APRA hasn’t already moved in response to the increase in investor lending.
“They achieved initial success through 2015 going into early last year, but since the low point for lending to investors in April of last year, [investor lending] is up over 20 per cent,” Mr Oliver noted.
“That suggests that the tightening measures that APRA introduced starting in the late 2014 going through 2015 seem to have worn off to some degree, and that’s a bit of a concern,” he said.
Elaborating on when he expects APRA to take action, Mr Oliver explained that it would probably be around the time that the RBA moves on rates, which he said would most likely be in May.
“If they don’t cut in February, which I don’t think they will, then the next most likely window will be in May, which is when I think they’ll probably revise down their inflation forecast at that point in time,” he said.
The RBA is likely to revise down its inflation forecast due to it improving at a slower rate than the bank is allowing for, according to Mr Oliver.
“The RBA has the headline and underlying rates of inflation at 2 per cent by June quarter, which I think seems unlikely,” he said.
The new Consumer Price Index (CPI) figures, released by ABS on Wednesday, show that on a calendar year basis, CPI rose 1.5 per cent, its lowest annual inflation rate in 20 years.
“We might see a bit of an upwards drift in inflation, but probably not enough to get it back to 2 per cent on an underlying basis, which is why the door is still open for a rate cut,” Mr Oliver emphasised.
“I think at the end of the day, if inflation is continuing to run below target for a longer period, then the RBA probably wouldn’t have any choice but to cut rates again,” he added.
“It’s premature to say that a rate cut is off the table, if inflation continues to go on the downslope.”
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Source: Mortgage Business
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