Calls against tighter lending as Butler mortgage crisis unfolds

Global ratings agency Standard & Poor’s says 5.12 per cent of mortgages in Butler are in arrears.

AS news broke that Butler has the third highest percentage of mortgages in arrears industry groups have criticised any call for a blanket tightening of lending conditions across the nation.

Last week a report by global ratings agency Standard & Poor’s said 5.12 per cent of mortgages in Butler were in arrears.

But it is not just Butler residents who are falling behind in paying their home mortgages.

The report quoted on on Wednesday, March 22 said in Western Australia the percentage of home loans in arrears had increased by 40 per cent from 1.5 per cent of mortgages in December 2015 to 2.1 per cent a year later.

Bayswater (ninth on the list) recorded 3.99 per cent of mortgages in arrears.

The report said higher unemployment, lower wage growth and falling property prices were creating mortgage stress in the resource dependent state.

While dwelling prices in have continued to decline in WA falling by 4.1 per cent in the year to the December 2016 quarter that is not the case in the eastern states.

Australian Bureau of Statistics data released by the Housing Industry Association showed dwelling price growth during the same period increased in Melbourne by 10.8 per cent, Sydney by 10.3 per cent, Tasmania by 8.8 per cent and the Australian Capital Territory by 5.5 per cent.

The data also showed dwelling prices grew in Queensland by 3.8 per cent while the S&P report showed six Queensland postcodes made up the top 10 postcodes with the highest percentage of mortgages in arrears.

Dwelling prices also continued to decline in the Northern Territory (-7 per cent).

On Tuesday, March 7 the minutes form the Reserve Bank of Australia’s monetary policy meeting said the board decided to leave the cash rate unchanged at 1.5 per cent.

Housing Industry Association chief economist Harley Dale said on the same day as an update on rising dwelling prices there had also been speculation regarding some tension between members of Australia’s Council of Regulators, plus an (appropriate) questioning of banks’ out of cycle interest rate hikes.

Mr Dale said a blanket tightening of lending conditions was the wrong policy and risked damaging Australia’s financial stability.

Housing Industry Association WA executive director John Gelavis said the association wanted new Treasurer Ben Wyatt to stand up for WA and ask regulators to act cautiously in regard to imposing further lending restrictions and to not impose any such restrictions on either investor or owner-occupier loan applications in Western Australia.

The Real Estate Institute of Western Australia and Urban Development Institute of Australia WA Division released a joint statement on the issue.

REIWA President Hayden Groves said talk of tightening lending conditions was a knee-jerk reaction to market conditions on the east coast.

“If lending conditions are made tougher for existing home owners, new home buyers and investors in WA, this will have a detrimental effect on our local housing market which is just starting to show signs of stabilisation,” he said.

UDIA WA chief executive officer Allison Hailes said decision makers in the eastern states needed to take WA’s delicate economic and property market situation into account before introducing any changes.

Mr Groves said affordability remained a significant issue for Western Australians, with the recent slowdown in the mining sector and challenging economic conditions continuing to present difficulties. “Tightening lending conditions in WA will have an adverse effect on affordability for West Australian home buyers, owners and investors,” he said.

“Lending finance for investment represents a substantial proportion of the WA property market, with 35 per cent of all lending in the state attributed to investors.

“Even if this regulation is only applied to investors, increasing borrowing costs would mean investors have no choice but to pass this down to tenants and would also limit the number of investors entering the market,’’ he said.

Ms Hailes said not only would stricter lending conditions negatively impact potential purchasers, they would impact directly on the construction of new homes and therefore jobs.

They both called on Mr Wyatt to address the issue at a national level to ensure regulators thoroughly considered the negative ramifications additional lending restrictions would have on the WA property market.