It appears MB’s constant prodding and mockery has paid off. Domainfax has been forced to deliver some editorial balance by recruiting Chris Kohler from The Australian and his debut is dark:
Homeowners who have been wrestling with their mortgage repayments are about to find things can get a whole lot worse as the Reserve Bank and the financial regulator hand the big banks two more reasons to hike rates.
The worst hit will likely be those who waded into frothy capital-city housing markets at the tail end of the boom. In its latest meeting the RBA warned that as many as eight official rate hikes are on the way as the cash rate heads for a new normal of 3.5 per cent, while the Australian Prudential Regulation Authority has raised bank equity targets by 150 basis points to 10.5 per cent.
This is happening in an environment where the gap between variable mortgage rates and the official RBA cash rate has doubled in 10 years and is the widest it has been since 1994. Experts say this gap is likely to widen.
In April the RBA warned in its Financial Stability Review that about one third of Australians had built up little or no buffer to higher interest rates or are less than one month ahead on their repayments. Recent UBS research shows 85-90 per cent of mortgages are variable, so this could see millions feel serious debt stress.
Add to that several big-name economists calling the peak of capital-city house price growth and the latest NAB research showing a spike in activity from first-time buyers.
Simply put, if wages growth doesn’t get its act together then bleak times lie ahead.
…Aside from the strong possibility of broad mortgage stress, this could be particularly worrying for first-home buyers who have recently jumped into the market.
Good stuff. Chris is an open campaigner against the housing bubble so bring this on. Sadly, he is also a card-carrying population ponzitier so he may end up being just another Jess Irvine hypocrite but let’s reserve judgement.
Chris has been appointed National Business Editor of Domain. MB would have provided the best available material on housing markets for free but that would have fried the Pascometer circuits entirely!
To wit, as the smooth digitised commentary of Kohler purred, the clapped-out analogue Pascometer was all gnashing gears and clattering ratchets:
The big question now about Tuesday’s Reserve Bank minutes that apparently frightened the horses and roiled markets: will the story last till the end of the week or just today?
Who didn’t know that, if the Australian economy was absolutely purring, growing at its full potential with inflation sitting in the sweet spot of 2.5 per cent, the RBA would like to increase the cash rate by a couple of hundred points? This is not news.
The only change is that the RBA board minutes made it explicit: in a Goldilocks Australia, the cash rate would be 3.5 per cent instead of the present 1.5.
But please note that considerable qualifier – that’s with everything running perfectly. It’s not and, despite the hopes expressed by the RBA, it doesn’t like being “just right” at any foreseeable point.
On it went as the mechanism threw a cog and vomited a spring violently yoking heterogeneous ideas. House prices only go up, after all, especially for FHBs!
One wonders if the obsolete model is not headed for the scrap heap. It would be a delicious irony to see the mechanism recycled as iron ore killing Chinese rebar.
Weeoo, weeoo, weeoo.
