Murray Review recommendations add costs for home buyers

Murray Review recommendations add costs for home buyersThe Property Council welcomed the release of the “root and branch” review of Australia’s financial system report but held concern that added capital weightings will land on the bottom line of new loans, pushing up the cost for new borrowers in 2015. The report notes the effect for home borrowers depends on whether the full cost is passed on to consumers with no offset in interest rates by the RBA. “Fundamentally the Financial Services Review finds that the Australian banking system is strong and its macro prudential exposure is low, however there are recommendations that could add upward pressure on housing loans costing consumers more,” said Nick Proud, Executive Director of the Residential Development Council. “Capital holding recommendations have the effect of adding weight to loans and costs to borrowers, which could hurt already low first home buyer rates, effect new housing starts and challenge seniors who are looking to downsize. “This added cost could dampen the current housing upturn response to pent up demand and reduce activity in emerging markets outside of Sydney and Melbourne. “On the upside, the Australian lending market is strong and quite competitive at the present time so the banks may seek to internalise the added cost of capital if the recommendation is introduced and the report does acknowledge this possibility. “Domestic housing finance lending in Australia has been managed prudently by the banking sector against systemic risks and policy makers can feel confident to strike a balance, providing both a strong banking sector and a vibrant residential market in 2015-16,” said Mr Proud. Media contact: Nick Proud, Executive Director – Residential Development Council: 0408 538 126