The alternative is that the regulator will step in and stop it for them.
“Household indebtedness is high. Perhaps more importantly, the trajectory is clearly for it to rise further,” Australian Prudential Regulation Authority (APRA) chairman Wayne Byres yesterday told the Australian Securitisation Forum in Sydney
“Lenders need to be vigilant to ensure their policies and practices are both prudent and responsible.
“In short, heightened risk requires heightened prudence by APRA but also — and preferably — by lenders and borrowers themselves.”
He said there had been a “slight moderation” in the proportion of borrowers being granted loans that represent more than six times their income.
This sort of lending, he said, was “well north of what has been permitted in other jurisdictions grappling with high house prices and low interest rates such as the UK and Ireland”
He said there was plenty of room for the banks to further tighten their lending practices.
“Sound policies only provide comfort if they are actually followed,” Mr Byres said.
“Aided by file reviews conducted by external auditors, we have confirmed there is more to do in this area to improve serviceability measures, particularly in relation to the assessment of living expenses and the identification of a borrower’s existing debts.”
Her said lenders needed to “devote more effort to the collection of realistic living expense estimates from borrowers.”