UPDATE 2-Australia's c.bank sticks to low rates even as housing market heats up

* RBA keeps rates at 0.1%, bond buying at A$4 bln a week

* Expects economy to rebound in Q4 after Q3 contraction

* Subdued wages, inflation mean no rate hike before 2024

* Regulators looking at home loan growth, housing prices (Adds fresh quote on housing)

SYDNEY, Oct 5 (Reuters) – Australia’s central bank held interest rates at a record low for an 11th straight month on Tuesday and sounded ready to keep them there for a few years even as pressure mounts for a hike to cool a red-hot housing market.

The Reserve Bank of Australia (RBA) concluded its October policy meeting with cash rates at 0.1% and its bond buying programme unchanged at A$4 billion ($2.92 billion) a week.

It was an outcome expected by all 36 analysts polled by Reuters as the bank has long argued that no rise was likely until 2024 given weakness in wages and inflation.

The need for continued stimulus has been underlined by coronavirus lockdowns in Sydney, Melbourne and Canberra which were certain to cause a painful contraction in economic growth in the September quarter.

The central bank is counting on a quick recovery now that vaccination rates are high enough for restrictions to soon be eased, with almost 80% of the adult population having received at least one dose.

New South Wales is set to relax stay-at-home rules from next week, with Victoria following later in October.

“As vaccination rates increase further and restrictions are eased, the economy is expected to bounce back,” RBA Governor Philip Lowe said in a statement.

He said the economy should expand again in the fourth quarter and recover all the ground lost to Delta lockdowns by the second half of next year.

“The Bank’s business liaison and data on job vacancies suggest that many firms are seeking to hire workers ahead of the expected reopening in October and November,” Lowe added.

Yet the prospect of rates staying so low for years ahead has also inflated a bubble in house prices, leading to much angst about affordability and debt.

The RBA has dismissed calls to use rates to curb the market, arguing it would only harm the broader economy and macro-prudential rules were the better tool.

Regulators last week signalled proposals on home lending would be released in the next couple of months and analysts expect a focus on income to debt ratios and loan valuations.

Analysts suspect they could limit the share of bank loans where the debt is six or more times the borrower’s income, and increase the minimum interest rate used to assess loan serviceability.

“The housing market has been firmly on the radar as dwelling price growth has remained very strong and new lending has switched from first home buyers to investors,” said Kristina Clifton, a senior economist at CBA.

“We expect macro-prudential policy to be reintroduced late this year/early next year,” she added. “It is likely to be quiet on the monetary policy front until February when we expect the RBA to taper bond purchases further.”

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