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Australian Bankers’ Association responds
to debate on lending standards
Sydney, 6 August, 2008: The Australian Bankers’ Association (ABA) said any debate on lending standards should be based on the facts.
The ABA was responding to today’s media reports which alleged banks are lending irresponsibly by offering home loans of one hundred percent of the purchase price of a property.
David Bell, Chief Executive of the ABA, said one hundred percent loans are available in the mortgage market. They are provided by some banks but are more commonly promoted by non-bank lenders.
“For the banks that offer one hundred percent loans, these loans would constitute a very small proportion of their lending portfolio. Before this type of loan is supplied, the bank would assess the capacity of a customer to repay the loan.”
“It is not in the interests of banks to provide home loans to those who are at high risk of being unable to meet monthly payments. Banks tells us that customers who typically take out one hundred percent loans are professionals who have more than adequate capacity to repay and possess sound credit records.”
Banks are responsible lenders and those who suggest otherwise are ignoring the facts:
- Reserve Bank data show that annual growth for housing loans is now the slowest in 21 years (since 1987) while personal lending is growing at 4.1%, the weakest pace since 1994.
- Banks undertake a detailed assessment of customers’ capacity to repay before providing a home loan.
- Banks conservative risk profiles and the rigorous assessment of the customers’ capacity to repay is reflected in the low level of banks’ loan delinquencies. The number of people with loans from banks who are behind in their home loan repayments remains extremely low.
- Banks are also subject to prudential supervision by the Australian Prudential Regulation Authority (APRA). Non-regulated lenders are not prudentially supervised by APRA, and often act more quickly on a mortgage default than a bank.
- Based on the ABA’s analysis of data and discussions with Supreme Courts, it is reasonable to suggest that anywhere between 65% and 80% of applications for repossession do not relate to banks, but to other lenders.
For further information:
Heather Wellard
Director Public Relations
Phone: 02 8298 0411
Mobile: 0409 830 439
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