We think recent developments fundamentally alter the Australian mortgage market. Re-pricing should support banks’ near-term earnings, but we forecast lower loan growth and believe current multiples ignore the risk of unintended consequences. We prefer ANZ (OW) to CBA (UW).
Fundamental change in the Australian mortgage market: In our view, the mortgage market is entering a new age. For the first time in a decade, we see a combination of more-onerous capital rules,higher mortgage rates, tighter lending standards and credit rationing. The future features higher margins, but lower loan growth, more capital and heightened risk.
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David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal.
He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.
