MacroBusiness covers Australian banks from the perspective of their macro-economic role, as political economy actors, as investment propositions and in terms of financial stability and capital adequacy. Australian banks have played a crucial role in inflating the Australian property bubble, exist within an utterly privileged position as “too big to fail” institutions and operate within a deeply distorted financial architecture that has Australian tax payers well and truly on the hook in the event of trouble. MacroBusiness seeks to define this role for investors as well as change it in the name of the Australian national interest.
For the past month, I have been warning of the inflating Commonwealth Bank share price bubble. Last week it reached a preposterous 22x forward earnings, far above any rational valuation and 50% above the value of its identical peer banks: This utter stupidity, doubtless driven by a mad dash for yield, even though CBA’s dividend
In the Q&A to yesterday’s Keynote Address at the Australian Farm Institute Conference, RBA Governor Phil Lowe stated that the Council of Financial Regulators (i.e. RBA, Treasury, APRA and ASIC) are actively looking at macroprudential tools to curb the mortgage/property market (listen from around the 34 minute mark): “The Council of Financial Regulators meeting last
It’s getting amusing. Australia’s largest utility, the Commonwealth Bank, is being historically rerated as a wildly prospective growth stock. It has now reached 22x forward, very much in line with the kind of valuations we see for FAAMGS and similar quality stocks with spectacular growth, earnings reliability and global domination: I guess all of these
Digital Finance Analytics (DFA) has released its mortgage stress figures for May, which shows that around 41% of households remained ‘mortgage stressed’, up significantly from the pre-pandemic level of 32.9%: Martin North explains the rise in mortgage stress as follows: Our approach to measuring stress is unique in that we examine household cash flow –
CoreLogic has released new data showing the increasing risk profile of Australian mortgage lending as investors have flooded back into the market. While the percentage of high loan-to-value ratio (LVR) lending fell over the March quarter to 10.4% from 11.3% – likely reflecting the reduction in first home buyers active in the market: The percentage
Goodbye TFF, goodbye rock bottom mortgages. ANZ just double-hiked its fixed-rate mortgages on the four year to 2.49% and five year to 2.69% The discounted variable is at 1.94%. This process will continue for months yet as banks are forced to refinance into more expensive wholesale debt as the RBA ends its Term Funding Facility
Is the Commonwealth Bank now a tech growth stock? Because it sure ain’t trading like a bank. You know, the boring, slow, reliable dividend growth of a utility. None of that, thanks. Apparently, it’s a 21x forward earnings, massively margined, FAANG or similar. The highest ever over-valuation by a country mile: The other banks are
For years I thought it would prove to be our downfall. The immense borrowing that our banks did offshore to leverage mining income into the great property bubble. Largely this was a failure of imagination because I never thought we’d be able to do QE without a collapsing currency. But then the pandemic came and
The AFR reported that the proportion of landlords negatively gearing rental properties fell to 58.6% in 2018-19, according to the latest Australian Taxation Office (ATO) statistics. This was the lowest level on record and well down on the peak of 69.6% in 2007-08. There were also 19,113 fewer negatively-geared landlords than in 2017-18, representing the
Another month has gone by and mortgage stress continues to grow, according to Digital Finance Analytics as reported in The AFR: “Many households in stress have less hours worked than they want, and no income growth. Bigger mortgages by first time buyers and equity drawdowns are lifting repayments as lending standards ease and more interest-only
UBS with the note: April home loans up-crash 86% since May; average OO loan jumps 20% vs Aug The housing market ‘up-crash’ is still accelerating. Home loan values in Apr-21 surged 3.7% m/m, to a record high, up 86% since May-20. Average loan size since Aug-20 jumped 20% for owner-occupiers to $542k; & investors +10%
On Friday, the Australian Bureau of Statistics (ABS) released data on new finance commitments, which showed booming growth in both owner-occupied and investor mortgages. As shown in the next chart, owner-occupied mortgage commitments soared 70% in the year to April 2021, whereas investor mortgage commitments surged 63%: As regular readers know, the growth in new
The Australian mortgage market remained red hot in April, hitting new all-time highs according to new data released today by the Australian Bureau of Statistics (ABS). The total value of new mortgage commitments rose by a seasonally adjusted 3.7% in April 2021 to be up 68.2% year-on-year: As shown above, the record increase in new
RBA Governor Phil Lowe last year endorsed Treasurer Josh Frydenberg’s proposal to axe responsible lending rules, telling the Standing Committee on Economics that Australian mortgage restrictions had become too strict and were constraining the economy: “We can’t have a world in which, if a borrower can’t repay the loan, it’s always the bank’s fault. On a
The support for mortgage holders over the past 18 months has been extraordinary. From suspended interest payments to cratered fixed interest rates, the worst of times was suddenly transformed into the best of times for the most leveraged. But those concessions are now ending as the RBA’s TFF rolls off and fixed rates rise. Plus
The Reserve Bank of Australia (RBA) has released its private sector credit aggregates data for the month of April. Quarterly mortgage credit growth continued to firm, rising for the 9th consecutive month to 1.5% – the highest rate of growth since September 2017: Owner-occupiers continue to drive mortgage growth, rising by 1.8% over the quarter
More than 33,000 Australians and 125 community groups recently signed an open letter against the Morrison Government’s legislation to abolish responsible lending laws, which are currently sitting in limbo in the Senate. As we know, the Hayne Banking Royal Commission’s very first recommendation was to maintain these responsible lending laws, which came after observing multiple
CBA latest internal lending data shows a record boom in fixed rate mortgage lending. As shown in the next chart, new lending for housing was up 50% year-on-year in April despite falling over the month: The average loan size has rocketed higher over the past few months. Rising dwelling prices mean that buyers generally need
As we know, the Hayne Banking Royal Commission’s first recommendation was to maintain responsible lending laws: The Hayne Royal Commission came to this recommendation after observing multiple cases of predatory lending over its 12 month deliberation. Despite this recommendation, Treasurer Josh Frydenberg is currently seeking to abolish responsible lending laws following pressure from the banking
The biggest driver of the current property upswing has been the sharp decline in mortgage rates, especially fixed rates. This is illustrated clearly in the next chart from CoreLogic, which shows new loan rates falling sharply over the past two years, driven by fixed rates: At the same time, the share of new mortgages taken
RateCity has released interesting data via Domain showing how new mortgage buyers are facing growing rates of mortgage stress, especially across Sydney and Melbourne. According to RateCity, the median buyer in Sydney needs to earn around $186,500 with a 20% deposit to avoid ‘mortgage stress’ – defined as spending more than 30% of a household’s
Analysis of major banks’ latest financial results shows that the amount they paid via the federal government’s controversial bank levy rose by about $50 million to $850 million at the peak of the COVID-19 pandemic. The quarterly levy of 0.015% on banks with liabilities of more than $100 billion was introduced in 2017. And The
As we know, the Australian Bureau of Statistics’ (ABS) latest lending data reported the biggest ever boom in mortgage finance commitments, up a whopping 55% in the year to March 2021: Amid the mortgage frenzy, there are increasing signs that lenders are dropping lending standards. The latest example came yesterday when NAB owned U-Bank announced
RBA Governor Phil Lowe last year endorsed Treasurer Josh Frydenberg’s proposal to axe responsible lending rules, telling the Standing Committee on Economics that Australian mortgage restrictions had become too strict and were constraining the economy: “We can’t have a world in which, if a borrower can’t repay the loan, it’s always the bank’s fault. On a
The Australian mortgage market remained white hot in March, hitting new all-time highs according to new data released today by the Australian Bureau of Statistics (ABS). The total value of new mortgage commitments rose by a seasonally adjusted 5.5% in March 2021 to be up 55.3% year-on-year: As shown above, the record increase in new
Those looking for any kind of house price relief would do well to track APRA’s monthly mortgage data. In particular, the series on household property investment is revealing about when APRA will move to slow the mortgage market. The news is: not in a hurry. The simple fact of the matter today is that mortgages
Last week, Tarric Brooker posted some stunning charts at News.com.au, gleaned from Digital Finance Analytics surveys, showing the record rise in financial assistance from the ‘Bank of Mum & Dad’, which is helping to fuel the boom in first home buyer (FHB) demand and Australian property values. Just prior to the pandemic, only 8% FHBs
The Reserve Bank of Australia (RBA) has released its private sector credit aggregates data for the month of March. Quarterly mortgage credit growth continued to firm, rising for the 8th consecutive month to 1.4% – the highest rate of growth since March 2018: Owner-occupiers continue to drive mortgage growth, rising by 1.8% over the quarter
As we know, the Hayne Banking Royal Commission’s first recommendation was to maintain responsible lending laws: The Hayne Royal Commission came to this recommendation after observing multiple cases of predatory lending over its 12 month deliberation. Despite this recommendation, Treasurer Josh Frydenberg is currently seeking to abolish responsible lending laws following pressure from the banking
Australian Prudential Regulatory Authority (APRA) chairman, Wayne Byers, has hosed down speculation that the regulator would take action to cool Australia’s rapidly rising property market: “Risk for the financial system occurs when lending standards are poor or weak,” Mr Byres told a Committee for the Economic Development of Australia event. “We don’t see that up
