Mortgage growth to fall sharply

From Deutsche:

Repricing of interest-only mortgages

In recent weeks the majors have announced repricing initiatives targeted at interest-only (IO) mortgages. While they raised IO rates by 30-35bps, owneroccupier principal & interest (P&I) rates were reduced by 3-8bps. These moves were responses to regulatory restrictions aimed at dampening housing risks rather than responses to the bank levy. We expect margin benefits to be partly offset by a substantial proportion of owner occupiers on IO switching to P&I (we assume 75%) and the changes accentuating a slowing in housing credit growth. As such our cash NPAT forecasts have increased by just ~1% on avg in FY19. Our top picks remain WBC and NAB.

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About the author

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.