Economics
Royal Commission will worsen credit crunch: Poll

The current credit crunch will deepen as a result of the financial services Royal Commission's final recommendations, Financial Standard's latest spot poll shows.

The majority of respondents (64%) agreed Commissioner Hayne's final report, which was released on February 4, will have the unintended consequences of making it tougher to obtain finance.

About one-in-four respondents (24%) believe it will have minimal effect on the housing market.

Nicki Hutley, a partner at Deloitte Access Economics, told Financial Standard's Chief Economists Forum in Sydney last week that tightened lending policies post-Royal Commission is nothing to be too concerned about.

While there has been significant adjustment in lending to property investors, owner-occupiers are still getting loans, Hutley said.

"The banks want to lend, that's how they make their money. They might want to lend more prudently, but they still need to keep lending," she said.

One of the positives to come out of this, she added, is that business lending is actually starting to tick up and is now growing ever so slightly ahead of housing lending.

Financial comparison website RateCity found an overall slump in housing finance using APRA data and warned borrowers that the start of the credit crunch would kick off in mid-2018.

New residential loans written in the March 2018 quarter fell by $2.5 billion compared to a year ago. Meanwhile, a loan-to-value ratio of more than 90% sunk to $5.79 billion - the lowest value since the records began in 2008, RateCity said.

Master Builders Australia chief economist Shane Garrett said newly built home activity remains solid despite the credit crunch.

"Going forward, we do expect the tougher financial environment to take its toll on the volume of new home building over the next few years. Larger apartment projects will probably see the biggest reduction," Garrett said.

This week we ask if Commission Kenneth Hayne's final recommendations were: adequate or didn't go far enough?

Read more: Royal CommissionFinancial StandardRateCityAPRAChief Economists ForumDeloitte Access EconomicsKenneth HayneMaster Builders AustraliaNicki HutleyShane Garrett
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