Major banks cutting rates on interest-only

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Via the AFR:

Major lenders are expected to follow the Commonwealth Bank of Australia’s latest round of interest-only mortgage cuts after losing market share because of massively over-estimating the impact of lending caps on their loan books, despite regulatory fears about rising debt and prices, according to analysts.

“Expect others to follow,” said Steve Mickenbecker, group executive for financial services at Canstar, which monitors rates and charges for financial service products, about the CBA’s recent cuts.

…CBA’s CEO-elect, Matt Comyn, recently flagged plans to rebuild interest-only market share after over-shooting the regulatory 30 per cent target and ending in the low 20s.

The impact is only “massively over-estimated” in the short term. By next year it will simply be massive:

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I can’t see another round of interest-only madness taking hold but why APRA didn’t slam the breaks on the non-banks long ago is beyond me.

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.