Reflecting on the recent flurry of activity to curb investor lending, SQM Research director Louis Christopher has anticipated a “second phase” may be necessary, with Sydney and NSW likely to bear the brunt.
“Mortgage originators remain hungry for market share and no doubt NSW, especially Sydney is where the credit demand has been,” Mr Christopher said.
“It would be very enticing to the banks to quietly keep their offers open in NSW while perhaps tightening the screws elsewhere in order to meet an overall minimum 10 per cent credit growth cap requirement.”
With the recent announcement that ING Direct will reduce LVRs in NSW to 80 per cent, Mr Christopher pondered whether the regulator as well as other lenders may follow suit.
“My thinking is that APRA will increasingly follow the recent action by the Reserve Bank of New Zealand (RBNZ) and focus putting LVR limits specifically on Sydney real estate investors,” he said.
“Setting such a course for the Sydney market and perhaps, later in time, on the Melbourne market would be optimal for the RBA. It would enable to keep rates low if not lower and would tactically target the problem ‘bubble’ areas.”
However, ING Direct also faces “the risk of just lowering [its] own market share” unless others jump on board, he added.