Interest only loans swing from downside to upside risk for house prices

Thursday, 20 June 2019

APRA released quarterly ADI property exposures yesterday. It is a great guide to many things but I use it mostly to track interest only mortgages.

The good news is that the interest only mortgage bubble that drove the last leg up in Australian house prices is now massively de-risked. The March quarter saw IO mortgage fall to near stand still as the Hayne Royal Commission did its work:

And that dragged the stock of IO loans down to very low historical levels as a proportion of the total mortgage book:

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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.