Via the excellent Jonathon Mott at UBS:
Scenario 1 – ‘Bounce-back’: A recovery in housing lending flow (+20%) back to record levels would add 2.2% to housing credit growth (1.5% to EPSg). But this would likely give rise to a sharp bounce in house prices and household debt. Stimulatory policies would likely be reversed. Scenario 2 – ‘Modest Recovery’: New housing lending bounces ~10%, adding 1.1% to housing credit growth and 0.7% to EPSg. However, with rates remaining low, NIM pressure from deposit spreads and replicating portfolios (hedges) offsets credit growth. Delinquencies continue to rise given Interest Only (IO) maturities. Scenario 3 – ‘ Stagnation’: Global environment remains uncertain and an increase in expense assumptions (HEM) offsets APRA’s removal of the serviceability floor.
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