Australia's central bank sees risks in housing market 'exuberance'

SYDNEY :Australia's central bank on Friday warned that"exuberance" in a red-hot housing market was encouraging a build-up of debt that might destabilise the financial system, urging banks to maintain lending discipline amid the boom.

"Higher prices have improved the financial resilience of existing indebted borrowers," the RBA said in its 68-page update."However, there has been a build-up of systemic risks associated with high and rising household indebtedness."To address this threat the Australian Prudential Regulation Authority this week announced a tightening of home loan rules to ensure borrowers could afford to cover their loans.

All this borrowing has seen home prices rise 20per cent in the past year, even with coronavirus lockdown measures in major cities hitting jobs and hampering sales.The Reserve Bank of Australia has dismissed calls to raise interest rates, currently at a record low of 0.1per cent, to cool the market, arguing that would only cost jobs and harm the economy.

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