Comment on potentially inaccurate home loan figures

12/5/94

Housing Minister Kevin Prince said today that potentially inaccurate home loan figures provided to the Australian Bureau of Statistics could lead to an impression that the housing market was overheating and could put pressure on interest rates.

Speaking after today's comments from Reserve Bank chief Bernie Fraser, who indicated his concern over the level of lending for the purchase of residential property, Mr Prince said in his view the level of lending was overstated.

The Minister said there were apparent anomalies in the way lenders reported new home loans to the ABS, and that this had already led to the Commonwealth Bank revising the home loan figures it provided to the ABS for the last quarter of 1993.

"It is vital all lenders follow the lead of the Commonwealth Bank in ensuring the accuracy of information provided to the Bureau," Mr Prince said.

"Based on information made available to me by the Master Builders' Association and the Housing Industry Association, it would appear that the level of new housing loans is overstated.

"By way of example, some lenders count refinancing of existing loans, where borrowers transfer their mortgage from one institution to another, as a new loan.  Clearly this is not the case, as no new building activity is undertaken.

"It is also clear to anyone who watches television or reads a paper that many lenders are happy to bundle, say, a personal loan of $10,000 with housing finance of $90,000 in a single $100,000 mortgage.  A loan of $100,000 may be reported, but it overstates the effect on the building industry by over 10 per cent.

"Directly and indirectly the building industry employs tens of thousands of Western Australians, and it must be able to have confidence in the information on which its predictions of demand for materials and trades is based."

Mr Prince said the accuracy of Australian Bureau of Statistics information was also paramount in terms of its effect on interest rates.

"Given the personal and business disasters caused by the interest rate regimes of the late 1980s and early 1990s, it is absolutely essential that the head of the Reserve Bank bases his decisions on facts, not on a public relations race between lenders trying to outdo each other for market share," Mr Prince said.

"If overstated loan figures lead to even the smallest increase in home loan rates it could turn the housing recovery around, and that would be a tragedy for an industry which, although performing strongly, is far from overheated on the information available to me."

Media contact:  Tony Barker-May 325 4133