The heads of two of the nation's biggest retail banks are becoming increasingly concerned about Australia's heated housing market and are taking a more cautious approach to lending.
Commonwealth Bank of Australia chief executive Matt Comyn told federal politicians such worries stemmed from ever-increasing housing debt at a time when housing prices continued to rise.
Financial regulators, such as the Reserve Bank of Australia and the Australian Prudential Regulation Authority, have been monitoring developments in the housing market, but have so far been satisfied that lending standards have not deteriorated.
"We think it would be important to take some modest steps sooner rather than later to take some of the heat out of the housing market," Mr Comyn told the House of Representatives economic committee on Thursday.
"The best regulation is self-regulation, so we shouldn't be entirely dependent on being instructed by the regulator."
Mr Comyn said the housing market was resilient and robust, even during lockdowns in NSW and Victoria, with no slowdown in mortgage applications.
He said CBA raised its servicing capability rate on mortgage applications to 5.25 per cent, well above the interest rate a customer would currently pay.
"We all would have a shared concern about making sure Australia's households are in a strong position to continue to pay, and also to support consumption in the broader economy in the second half of this decade if interest rates are rising, and potentially rise more quickly," he said.
ANZ CEO Shayne Elliott told the hearing there was always a time for caution when there are house price rises like those being seen now.
ANZ expects capital city house prices to increase by just over 20 per cent by the end of this year, and predicts a further modest increase of around seven per cent in 2022.
Mr Elliott said it was not known what was exactly going to happen in the economy during the next 12 months due to the pandemic and restrictions easing.
"We are taking more time to be careful. We asking more questions to really assess whether people do have the capacity to take on the debt that they would like," he said.
"That has meant in our case, we have lost a bit of market share in the meantime as a result of that, but it is the time to be prudent and be a bit more cautious."
The hearing was part of the committee's regular check-up with the country's big four banks.
As with its discussions with National Australia Bank and Westpac earlier this month, the committee used part of hearing to pursue its investigation into the implications of common ownership and capital concentration.
The committee is concerned such concentration could steer the decision-making of an entity.
Mr Comyn said while this was conceptually possible, there was no evidence of this occurring in the some 300 investor meetings he had attended.
"I have never had an investor say you should do this or that," he said.
Similarly, Mr Elliott said he had probably attended a thousand such meetings in his time at the bank, and questions were generally seeking clarity on the bank's strategy.
"I can't recall a time any shareholder has tried to influence decision making at the bank," he said.
Australian Associated Press