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TIP: mortgage rates to hit the twos, lenders grapple for share, SYD unprepared for population growth

Will lowering rates to ease business and household debt create a new housing bubble?

That's the question The Australian's John Durie is asking today, as he raises the prospect of mortgage rates starting with the number two. If the RBA cuts official interest rates when it meets next Tuesday, that's a likely scenario; ING, HSBC and Macquarie are already offering home loans a smidge above 3 per cent.

This at the same time Westpac has lowered its debt serviceability floor from 5.75 per cent to 5.35 per cent this week. Before APRA slashed its mandated serviceability buffer, this rate sat at 7 per cent.

The Council of Financial Regulators met last week and decided, based on the still-soft interest among property investors, that the risk of a renewed housing bubble is low. But that's not slowing competition among primary and secondary lenders for market share.

According to an AFR-commissioned study by Canstar, the big four have clawed some of their market share back from non-authorised institutions (non-ADI) following APRA's lowering of the serviceability buffer.

A tale of two loans depending on a developer's reputation

According to research by law firm Ashurst, reputation is having a lot to do with the ability for residential apartment developers to secure finance from Australian lenders at the moment.

Since 2017, the major banks have more than halved their exposure to residential apartment development, from $5.2 billion to $2.3 billion. But competition is white-hot for projects by "top-tier" developers, with more attractive loan-to-value ratios on offer for reputable developers and projects. If this isn't proof that reputation means something in the development space, I don't know what is.

While on the topic of developer lending: today's Fin has a piece on Supra Capital, a Melbourne property developer that switched to become a lender to mid-tier developers. It's now writing more than one loan a month of between $5 million and $25 million - which is too big for regular lenders but not big enough for the major institutions.

All this, while the great stimulus debate between the RBA and the government splutters on. We have a government focused on surplus, and a Reserve Bank seriously considering other measures such as quantitative easing in addition to the further lowering of interest rates.

This may lead to attractive home mortgage rates - but the very problems the RBA is working to solve will also inevitably lead to less people being able to take advantage of the competitive lending environment.

As Sydney's population climbs toward 7 million, the heat is on infrastructure

The Sydney Morning Herald's population summit was yesterday, and it hosted a grab-bag of pundits talking up how the Emerald City isn't ready to take those kinds of numbers.

While the Berejiklian government is pushing ahead with the biggest infrastructure development boom we've seen in Sydney in 30 years, the likes of federal opposition leader Anthony Albanese, Committee for Sydney and Ethos Urban all reckon it's not enough.

A primary topic of conversation was the need for more public transport infrastructure to reduce reliance on cars. It was also interesting to see NSW planning minister Rob Stokes calling for more variety in size and style of housing - from more four-bedroom apartments to smaller detached housing, and a stack more medium-density housing in between. For that to happen though, we might need Sydney's councils to actually adopt the planning changes requiring more medium density in their municipalities.

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