In the latest DFA video blog we discuss the recent mortgage rate changes. The regional banks, who will not be impacted by changes to capital weightings, and are not over the investment loan 10% speed limit, lifted their investment loan rates, following the majors. Across the industry, new and refinanced owner occupied loans are now potentially cheaper.
We argue that whilst the banks have used the APRA speed limits and the proposed capital weighting changes (which do not come in until next year) as the excuse, the changes have more to do with competitive dynamics and pre-positioning for driving owner occupied lending hard. In addition, APRA has no interest in building competition in banking, its all about financial stability. We conclude their interventions have provided a convenient platform for the banks, en masse, to increase margins at the expense of investment borrowers. It also demonstrates the pricing power of the majors.
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