The Customer Owned Banking Association (COBA) urged the regulators to take care to avoid anti-competitive impacts on smaller banks with any potential macroprudential intervention.
Any measures must be carefully targeted at a clearly identified problem so they do not disadvantage smaller banks and first home buyers, it said.
"Adequate consultation prior to intervention will reduce the risk of unintended consequences on smaller banks from any macroprudential measures,” said COBA CEO Michael Lawrence.
In its September quarterly statement, released yesterday, the Council of Financial Regulators said a key item of discussion at its Friday meeting was housing market risks and possible macroprudential policy responses.
"We also note comments by the Treasurer that ‘carefully targeted and timely adjustments are sometimes necessary’,” he added.
"However, the Treasurer also noted that ‘a positive feature of this housing cycle compared to that of the last is a higher proportion of first home buyers and owner-occupiers entering the market’.
"This is consistent with comments by APRA Chair Wayne Byres on 2 June 2021 about the pick-up in high loan to value ratio (LVR) lending, associated with ‘a welcome increase in the proportion of first home buyers that have come into the market over the last 12 months’.
"As the APRA Chair said, ‘I think that's a good outcome. So, yes, those borrowers tend to have higher LVRs, but I'm not sure that there's any great value in us stomping on first home buyers who are trying to get into the market’.”
"Our sector’s focus on owner-occupiers and first home buyers is illustrated by our higher than system share of high LVR owner-occupier loans as a percentage of new loans and our sector’s 20 lenders on the First Home Loan Deposit Scheme panel,” adds Lawrence adds. “Our sector’s prudent approach is highlighted by the non-performing loans ratio, where we are tracking at around the third of the system rate.”