Given we now have mortgage rates 3% higher than at the start of the year – analysts are asking whether there are yet signs of mortgage portfolio risks in the banking system.
We certainly know that households cash flows are under pressure, from our own mortgage stress analysis, and Roy Morgan’s research on consumer confidence and their own mortgage stress analysis.
And we know that APRA’s 3% “Buffer” is being breached now, and it is even worse when they had set a 2% buffer earlier on.
But all that said, there is a lag between rate rises and delinquency – of months, if not years, so I would not be expecting much movement yet – that comes later. This also aligns with recent incoming data too.
For example, according to the latest Quarterly Statistics from APRA, the banks wrote fewer high loan-to-value ratio mortgages and decreased high debt-to-income lending over the September quarter, which the prudential regulator has welcomed.
They welcomed the fact that the banks have been “improving” the risk characteristics of their new residential mortgage lending, after finding that both high debt-to-income (DTI) and high LVR lending had reduced over the September quarter and suggested that the figures were largely promising given the strength of the banks’ profitability and liquidity positions as well as the reduction in “riskier” lending.
Today’s post is brought to you by Ribbon Property Consultants.
