As we move into the last four selling weeks of 2020, there continues to be significant momentum in the real estate market, and the good news for purchasers is that more properties are coming onto the market. Our new listing levels are at their highest in 2020, allowing purchasers more choice and the opportunity to make offers and bid with confidence.
This week, the Reserve Bank prepared a new debt-to-income (DTI) ratio, linking it to a new commitments survey. Previous reports have shown how financial stability in each sector is linked to mortgage commitments and total borrower debt. The added area of gross income provides a more reliable measure of mortgage serviceability for homebuyers, particularly owner-occupiers.
One area the Reserve Bank has focused on is unreasonably high new debt-to-income ratios. The following graph illustrates that in 2016, when the market was particularly strong, risk lending increased significantly, a trend that has also been observed in the latter half of 2020. The Reserve Bank will consider this when deciding whether to reintroduce the land-to-value ratios required for lending.