The chairman of Australia's banking regulator has said it is monitoring the practices of individual mortgage lenders and will decide "in the next month or so" if any supervisory action is needed.
"So far, our discussions with the major lenders have suggested they recognise it is in everyone's interests for sound lending standards to be maintained, APRA Chairman Wayne Byres told the the House of Representatives Standing Committee on Economics. "But we shall see - we are ready to take further action if needed."
Mr Byres said regulating booming house prices was not part of the Australian Prudential Regulation Authority's responsibility.
"We are not targeting house price levels - as I have said elsewhere, that is beyond our mandate," Mr Byres said. "We are not at this point asking banks to materially reduce their lending."
Mr Byres said the banking regulator was seeking to "ensure emerging risks and imbalances do not get out hand".
House prices have climbed strongly in Australia over the past year, prompting APRA to warn in December it would move to curb over zealous mortgage lending, especially for property investment now at record levels, if there is no moderation.
Strong growth in lending to investors was cited in the Reserve Bank of Australia's last board meeting statement, as were house prices in Sydney, which have consistently outpaced rises elsewhere.
"The bank is working with other regulators to assess and contain risks that may arise from the housing market," RBA governor Glenn Stevens said, after holding the official cash rate at 2.25 per cent this month.
The RBA's decision to cut rates last month has already been accompanied by signs of fresh momentum in the housing market, including higher auction clearance rates and prices. Sydney house prices rose 14 per cent in the year through February.
APRA has set benchmarks that will be used to indicate where risk could be building, Mr Byres said, in a move to reinforce sound lending practices among the banks.
The benchmarks will help APRA decide whether regulatory actions, such as higher capital requirements, may be warranted.
"So far, our discussions with the major lenders have suggested they recognise it is in everyone's interests for sound lending standards to be maintained," Mr Byres said. "But we shall see - we are ready to take further action if needed."