From Banking Day:
When asked to say what concerned them most about the prospects for the mortgage market in a year ahead, a panel of industry participants said changes to regulatory policy settings might put additional pressure on capital requirements and force lenders to put up interest rates.
Deloitte has published its Australian Mortgage Report 2016, which paints a picture of a market with good growth prospects, despite being buffeted by regulatory headwinds. The report included the findings of an industry roundtable.
Last October and November banks put up mortgage rates by between 15 basis points and 20 bps. This move was led by the big banks, which had raised equity during the year to strengthen their capital positions in line with regulatory requirements.
There is more on the drawing board, including a higher risk weighting for loans that rely on a rental income stream to service the loan.
Macquarie Bank head of personal banking Frank Gains said: “We would expect that the re-pricing cycle for mortgages that started some six months ago across the industry will continue.”
…Pepper Group co-chief executive Patrick Tuttle said: “My concern is that if the banks can’t be trusted to do their own sophisticated internal modelling the regulators will dumb the market down to the lowest common denominator, which will drive inefficiencies in the market and reduce competition.”
Deloitte financial services partner Kevin Nixon said the round of mortgage risk weight changes that were announced last year added about 80 bps to 100 bps to capital requirements.
Nixon said: “The Government has asked APRA to take additional steps in 2016 towards the ‘unquestionably strong’ goal, so in addition to changing how mortgages get calculated, there is potential for further pressure for banks to hold more capital overall.”
Yep. But some relief today at least from wholesale funding markets with CBA CDS continuing its retracement on the sudden “buy Straya” trade falling 4% to 103bps yesterday:
There was a little lift in our European proxy and the US proxy was flat so the Ponzi Index fell meaningfully too:
Iron ore is clearly playing a role here and given it is in some kind of blowoff top I do not expect the larger up trend in CDS prices to break even if we see further retracement first.
