The banking regulator is on alert over deteriorating credit standards amongst the nation's mortgage lenders, its chairman says.
"The rate of growth in credit for housing is, in aggregate, still accelerating," Australian Prudential Regulation Authority chairman Wayne Byres told federal parliament's house economics committee on Friday.
However, there have been some changes in the lending mix, with growth to investor borrowers moderating in the face of stronger growth in lending to owner occupiers.
"In such an environment, APRA remains very alert to any sign of deteriorating credit standards," Mr Byres said.
The regulator was monitoring the market to ensure financial institutions identified as needing to strengthen their lending policies in fact did so, he added.
APRA's recent push to force lenders to hold more capital as a buffer against loan losses has been blamed for the recent decisions by three of the big four banks to raise their mortgage interest rates.
In November, Commonwealth Bank of Australia will raise its owner-occupied standard variable mortgage rate by 15 basis points to 5.60 per cent while Westpac will raise its rate by 20 basis points to 5.68 per cent.
Borrowers with a $300,000 mortgage face paying about an extra $30 a month, or around $350 a year.
Today, National Australia Bank followed suit, hiking interest rates by 17 basis points to accommodate stricter capital reserve rules.
ANZ is expected to follow the lead of its peers.
Soon after Mr Byres finished giving his opening remarks to the committee, NAB raised its owner-occupied standard variable rate to 5.60 per cent, also effective in November.
Quizzed by the committee on the prospect of the big four banks and Macquarie passing on increased costs from the stronger capital rules in the form of higher rates, Mr Byres admitted "the finger is being pointed at us as a cause".
APRA has previously estimated the impact of the rules could add about 10-15 basis points to lending rates, if costs were passed on.
"We don't pretend that there isn't going to be some kind of impact from this change in capital requirements," Mr Byres said.
There were a range of factors banks would consider when setting prices, and the impact for each would be different.
However, Mr Byres pointed to strong competition in the mortgage market, which comprised more than 100 institutional and non-bank lenders.
"We do have to rely on the competitive forces in the market providing constraint on any excessive pass-through of those costs," he said.
"Ideally, you would like to see the cost shared around in proportion to those that benefit from it, but it's difficult for us to say with any precision `well that means you can only charge 'x'."
"We have to allow banks to make their commercial decisions and then the competitive environment to play out."