November 2019 - Bongiorno Financial Update

What's in this issue?

• A loosening in macroprudential policy in 2019 is one of the factors behind the turnaround in home prices.

• We expect home price growth of 5% after the current bounce runs its course. But, the strong reacceleration in Sydney & Melbourne prices means upside risks.

• Macroprudential policy could be used again if the housing upswing creates new financial stability risks. The biggest risk is extremely high Australian household debt. However, policies like debt-to-income or loan-to-value caps and lending limits would probably cause more distortions in the housing market.

• The problem of high household debt is the impact on debt serviceability, especially if the economic backdrop deteriorates. It would be better for macroprudential policy to continue to focus on mortgage serviceability which can be controlled by further strengthening lending standards when assessing individual borrower serviceability.

Kind regards,

ANTOINETTE BONGIORNO
LL.B. B.Com. CFP DipFP A.S.A. Cert IV. FMB.

Level 2
431 St Kilda Road
Melbourne VIC 3004
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