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Fitch revised forecast could lead to tighter home loan regulations

Jodie Humphries 18 January 2017

Fitch RatingsRatings agency Fitch has just released the new outlook for Australian banks, and it isn’t good news.

The Age reported the agency revised its outlook for the Australian banking sector to negative based around concerns over increased household debt, rising house prices and other economic factors.

Fitch has kept the rating for the banks stable, but when looking at the year ahead there was concern over sensitivity to interest rate changes due to rising household debt.

“Salaries are not increasing therefore people's ability to repay loans becomes restrained. People are accepting lower paid jobs, or jobs that are three days a week instead of five,” Fitch said, as quoted in The Age.

Fitch forecasts that lenders will be under further pressure to monitor and manage a rise in bad or speciality loans, particularly in mining-heavy areas of Queensland and Western Australia.

Standard & Poor’s rating agency made a similar change to its outlook for the big four banks in July. The agency cited similar concerns as Fitch around increased risk to lenders from rising house prices and household debt.

The Australian Prudential Regulation Authority (APRA) has said there was not enough systemic risk at the moment for further enforcement of capital requirements on the banks. The regulator indicated it would continue to monitor the sectors of the housing market that are seen as riskier, such as investors and interest-only lending.

Pictures: 4kclips / Shutterstock

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