Judo Bank chief executive Joseph Healy has sounded a warning over the ongoing build-up in housing debt, saying it would be foolhardy to assume interest rates will stay at record lows for an extended period of time.
Mr Healy, who previously ran National Australia Bank’s flagship business bank, on Monday said one of his key concerns over the medium to long-term was the “almost uncontrollable rise in household debt”.
“We see it in the housing market. It almost defies economic logic,” he said.
“The banks have been lending at six, seven, eight times disposable income, and loan-to-value ratios have been climbing up. Now this is in an economy that already, pre-COVID, had the second highest household debt ratio in the world.”
“So you’ve got this huge explosion in housing asset prices, huge explosion in debt, albeit in a low interest rate environment. But to assume that a low interest rate environment is going to hold, three years plus from now, in an inflationary environment, is foolhardy.”
“So for me that’s one of the clouds on the horizon,” Mr Healy said at a Trans-Tasman Business Circle event in Sydney.
Judo is a challenger bank targeting small and medium enterprises, a market that is attracting a wave of interest from major banks, as many firms lock in cheap funding to upgrade their equipment or machinery.
Despite his concerns about housing debt, Mr Healy painted an upbeat view on the outlook for business credit, and also confirmed the company was considering bringing forward plans to potentially float the business, in order to access capital.
“It’s not a definite, but it’s something we’re evaluating,” he said.
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