The Australian Prudential Regulation Authority has followed the lead of the Reserve Bank of Australia in cautioning against measures to aid competition in the mortgage market.
In its latest submission to the Financial Services Inquiry, APRA called into question ideas under consideration to boost competition to the big four banks in the mortgage market.
"APRA is not supportive of policy proposals that would further increase the incentive for ADIs (authorised deposit-taking institutions) to provide housing finance over other forms of lending," the banking regulator said, adding that the size of home loan exposures already presented a "source of systemic risk".
The comments follow a submission from the RBA that also warned against changes that would encourage greater home lending, amid fears of enhanced risk and reduced business lending.
"The supply of mortgage finance in Australia is ample," the RBA said. "Therefore, any proposed policies that could further increase that supply should be subject to rigorous analysis of their costs, benefits to consumers and risks to financial stability."