Major Banks Are Highly Leveraged, And More Profitable

APRA released their key metrics for ADI’s to June 2017.  Net Profit across the sector, after tax was $34.2 billion for the year ending 30 June 2017. This is an increase of $6.5 billion (23.5 per cent) in 2016.

Provision were lower, with impaired facilities and past due items as a proportion of gross loans and advances at 0.88 per cent at 30 June 2017, a decrease from 0.94 per cent at 30 June 2016.

The return on equity was 12.0 per cent for the year ending 30 June 2017, compared to 10.3 per cent for the year ending 30 June 2016.

Looking at the four major banks, where the bulk of assets reside, we see that the ratio of share capital to assets is just 5.4%, this despite a rise in tier 1 capital and CET1. This is explained by the greater exposure to housing loans where capital ratios are still very generous, one reason why the banks love home lending. Thus the big four remain highly leveraged.

Looking more broadly at the APRA data:

On a consolidated group basis, there were 148 ADIs operating in Australia as at 30 June 2017, 148 at 31 March 2017 and 156 at 30 June 2016.

  • Bankstown City Credit Union Ltd had its authority to carry on banking business revoked, effective 16 June 2017.
  • ECU Australia Ltd, had its authority to carry on banking business revoked, effective 4 May 2017.
  • China Merchants Bank Co., Ltd, had its authority to carry on banking business authorised, effective 6 June 2017.
  • Taishin International Bank Co., Ltd, had its authority to carry on banking business authorised, effective 23 May 2017

    The net profit after tax for all ADIs was $34.2 billion for the year ending 30 June 2017. This is an increase of $6.5 billion (23.5 per cent) on the year ending 30 June 2016.

The cost-to-income ratio for all ADIs was 50.5 per cent for the year ending 30 June 2017, compared to 50.7 per cent for the year ending 30 June 2016.

The return on equity for all ADIs was 12.0 per cent for the year ending 30 June 2017, compared to 10.3 per cent for the year ending 30 June 2016.

The total assets for all ADIs was $4.64 trillion at 30 June 2017. This is a decrease of $4.6 billion (0.1 per cent) on 30 June 2016.

The total gross loans and advances for all ADIs was $3.12 trillion as at 30 June 2017. This is an increase of $141.5 billion (4.8 per cent) on 30 June 2016.

The total capital ratio for all ADIs was 14.2 per cent at 30 June 2017, an increase from 14.1 per cent on 30 June 2016.

The common equity tier 1 ratio for all ADIs was 10.2 per cent at 30 June 2017, unchanged from 10.2 per cent on 30 June 2016.

The risk-weighted assets (RWA) for all ADIs was $1.97 trillion at 30 June 2017, an increase of $123.0 billion (6.7 per cent) on 30 June 2016.

For all ADIs:

  • Impaired facilities were $13.2 billion as at 30 June 2017. This is a decrease of $1.8 billion (11.9 per cent) on 30 June 2016. Past due items were $14.4 billion as at 30 June 2017. This is an increase of $1.3 billion (10.3 per cent) on 30 June 2016;
  • Impaired facilities and past due items as a proportion of gross loans and advances was 0.88 per cent at 30 June 2017, a decrease from 0.94 per cent at 30 June 2016;
  • Specific provisions were $6.6 billion at 30 June 2017. This is a decrease of $0.2 billion (3.6 per cent) on 30 June 2016; and
  • Specific provisions as a proportion of gross loans and advances was 0.21 per cent at 30 June 2017, a decrease from 0.23 per cent at 30 June 2016.

 

 

New Home Sales Decline In July

The HIA New Home Sales report – a monthly survey of the largest volume home builders in the five largest states – show that sales volumes declined by 3.7 per cent during July 2017 compared with June 2017. Sales for the first seven months of this year are 4.6 per cent lower than in the same period of 2016.

Sales of new detached houses during July 2017 fell by 0.4 per cent nationally to their lowest level since October 2014. Victoria was the only state to experience growth (+9.8 per cent). Detached house sales fell in South Australia (-16.2 per cent), Queensland (-16.1 per cent), Western Australia (-9.1 per cent) and New South Wales (-5.2 per cent) during the month.

“A drop in new apartment sales have contributed to the continuing decline in new home sales nationally since they peaked in mid 2015,” stated HIA’s Principal Economist, Tim Reardon.

“July’s result was driven by a 15.7 per cent decline in multi-unit sales and a more measured reduction in detached house sales. The large drop in multi-unit sales this month is in contrast to strong sales volumes late in 2016 and early 2017,” outlined Mr Reardon.

“This trend is consistent with HIA’s expectation that activity will decline modestly from these record high levels over a number of years,” added Mr Reardon.

“Victoria was the notable exception – as the only state to grow sales during July 2017. Sales were up by 9.8 per cent on what is already a very high level of activity.

“On the other hand, the Western Australian Government’s First Home Buyers grant ended on 30 June 2017 and as a consequence sales in July fell sharply from what was already a very low base.

IO Mortgages On The Decline, But Loans Outside Normal Serviceability Rises

The latest APRA data showing ADI Property Exposures to June 2017 gives us a read on the mix of business by lender type. The new business data is the most relevant in monitoring current market changes. But we look at the loan stock data first.  Home lending grew at 7.3% past 12 months, significantly above inflation and wage growth, underscoring continued household indebtedness. The debt monster continues to grow!

Overall, the ADIs’ residential term loans to households were $1.54 trillion as at 30 June 2017, an increase of $105.2 billion (7.3 per cent) on 30 June 2016. Owner-occupied loans were $1,006.2 billion (65.3 per cent), an increase of $75.8 billion (8.1 per cent) from 30 June 2016; and investor loans were $535.7 billion (34.7 per cent), an increase of $29.4 billion (5.8 per cent) from 30 June 2016.

Looking at new loans, ADIs with greater than $1 billion of residential term loans approved $384.0 billion of new loans in the year ending 30 June 2017. This is an increase of $12.0 billion (3.2 per cent) on the year ending 30 June 2016. Of these new loan approvals: Owner-occupied loan approvals were $249.9 billion (65.1 per cent), a decrease of $1.1 billion (0.5 per cent) from the year ending 30 June 2016 and Investment loan approvals were $134.1 billion (34.9 per cent), an increase of $13.2 billion (10.9 per cent) from the year ending 30 June 2016.

Now, APRA warns they are using different metrics to monitor IO loans:

The data used by APRA to monitor ADIs’ new interest-only lending is not the same as the source data for the statistics in this publication. First, APRA monitors ADIs’ new interest-only lending using data on loans funded; statistics in this publication show loans approved. Loans approved is a broader definition than loans funded; loans approved may not necessarily be funded. Second, APRA monitors new interest-only loans funded by all ADIs; interest-only mortgage statistics in this publication are based on data reported by 32 ADIs with over $1bn in residential term loans.

We think APRA should be transparent about their IO loans data, as we cannot see what is occurring. They have not explained WHY they are mixing the two measurement methods and why they do not reveal the true picture. Also of course IO loans for non-banks are not included in their statistics. So, again we get a partial view.

That said, we see a significant drop in the relative number of IO loans written since they intervened in the market. All lender categories show a fall. The average across ADI’s is still above 30%.

Another indicator is the proportion of loans approved outside serviceability, the proportion of loans in the category has risen. 6% of CUBS (combined Credit Unions and Building Societies) were outside normal criteria. This may be an indicator of higher risks, when compared to the lower rates among other lenders.

The proportion of loans via brokers remains pretty strong, with foreign subsidiaries sitting at around 70%, compared with the major banks at 48%. Other domestic banks are a little higher, whilst CUBS are lower.

Major Banks are lending more investor home loans (37.3%), compared with market at 34.5%.

Turning to the LVR bands for new borrowing, the proportion below LVR 60% remains relatively stable, but has risen a little.

Around half of all new loans, across most lenders are in the LVR 60-80% range, and has risen a little.

We see a rise in 80-90% LVR loans from the foreign banks, a fall in CUBS and a relatively stable picture across the other lenders.

Higher LVR loans, above 90% are down slightly, apart from CUBS (though small volumes).

APRA also made a change this time by merging Credit Union and Building Society in a single set of tables.

As of the June 2017 edition of the Quarterly ADI Property Exposures publication, the standalone building societies tables (tables 3a, 3b, and 3c in previous editions) and the standalone credit unions tables (tables 4a, 4b, and 4c in previous editions) will be discontinued and replaced by the combined credit unions and building societies tables

CBA CEO apologises to brokers

From The Adviser.

Ian Narev, the outgoing chief executive officer of the Commonwealth Bank, has apologised to brokers for some of the “uncertainties” it has caused.

Speaking at Aussie’s biannual conference on 28 August, Mr Narev touched on the changes in credit policies and rates, etc., following regulatory changes on certain segments of the home lending market, as well as the “difficulties” the bank has had in implementing them.

Mr Narev said: “Given this is the first time many of the banks have got used to things like investor home loan [changes] and interest-only caps, the transition to these caps has been difficult and has caused a little bit of uncertainty for people in this room that we’re really sorry about. And we acknowledge it.

“I think that we are in an environment where there is still good lending to be done, but it will probably just be a little bit calmer than they had be, and that is probably a good thing.”

The CBA CEO also emphasised that it was “very committed” to the broker channel, but understood that there was “ongoing work” that needed to be done.

Noting the completion of CBA’s purchase of the remaining shares in Aussie last week, Mr Narev said: “I think the key is, we bought Aussie (initially the third ownership in 2008 building up to today) because it is such a successful business under its current business model and we don’t want to change it.

“John [Symond] has said that the key to Aussie’s success has been its independence, customer focus, not being tied to any particular bank, so we’d be crazy to change that. So, it’s more of the same, more successful. So as John says, we [can] step back from it and let it continue its great momentum.”

Brokers are “good for customers”, said Mr Narev.

He acknowledged that while the bank has “never shied away” from wanting to do its own business through its branches and direct channels, using a broker was “good for customers”.

He said: “A large number of Australians want to go through a broker, and that’s why we deal with brokers and have a relationship with Aussie, because it’s good for customers. And we’re very committed to the channel. We understand that as part of that, there is ongoing work and investment that we need to do in our processes to make it easier to deal with us, and that’s something we listen to very carefully and we aim to continuously improve, because you have to be good at it to be competitive in the channel.”

The CEO CBA continued: “Ultimately, you want your proprietary channel to be as good as possibly can be and your relationship with the brokers to be as good as it can possibly be, and let the customer make the choice. And at the heart of this, in my mind, is making sure you’re customer-focused and help the customer in whatever way he or she wants, whether that’s through our branches or website or through a broker.”

Mr Narev later told The Adviser: “We didn’t buy the [Aussie] business only to sell it; we bought it because we have a great relationship with Aussie. We see it as strategically important, so there is no change as a result of the change in ownership.”

‘Trust in the bank has weakened’

Speaking on the morning of the announcement that APRA was to hold an independent inquiry into the bank’s “governance, culture and accountability frameworks and practices”, Mr Narev conceded that “trust in the bank has been weakened”.

He said: “What APRA has announced this morning is that it wants to take an independent look into a number of frameworks in the way we manage business in certain ways. [It comes] in the response to the fact that, over recent times, trust in the bank has been weakened. That is undeniable.

[But] we’re very confident in the practice of the Commonwealth Bank, and we’re also very confident that we’re all focused in the right direction…. The reality is that in the modern world, the public needs confidence and therefore APRA has obviously made this announcement that it wants to hear from some independent people as to how the bank is going versus hearing form us. That has our full support and cooperation.”

Mr Narev continued: “What we can see here is a very strong, highly respected prudential regulator, APRA, saying that, in order to make sure public confidence is as high as it can be, let’s have an independent process … where people can [hear from] voices other than the voices inside the banking system.”

He added: “We welcome it, and we think APRA is the right body to be administering that and we will be fully cooperative.”

When asked about whether he believed that there could be any reputational damage to Aussie brokers, as a result of some of the negative press circulating about CBA, Mr Narev emphasised that while CBA owned the company, Aussie was independent.

He said: “People here work for Aussie … nothing changes. But recognising that Commonwealth Bank is the owner of Aussie home loans, we know that people have an interest in us.

“What we can tell people — and make sure that people are very clear about — is where we have made mistakes, we will put them right…. And what people here can have confidence in is that we have a long-term view of the business. We will manage it for the long term, build trust, strengthen reputation and do whatever we can to make sure that Aussie is successful as its always been.

“As an owner, our sole goal is to keep the business successful as it has been, and the logic tells me to keep it going as it’s been going.”

Chairman of Aussie John Symond also publicly gave his backing to CBA at the conference.

When asked his thoughts on the potential negative reputational impact CBA could have on brokers, Mr Symond said that he obviously felt “disappointment” but added that bad things do happen.

Noting that he was not privy to the details of what has happened or what is going to happen, he said that he remained a “huge supporter of the Australian banking system”.

He added: “I believe in the Australian banking system going forward and obviously have a close association with Commbank. I’m confident that they have the people, the skills, the belief, the vision, the culture that whatever crap’s happened, they’ll fix it.

“Do we like what’s happened? Obviously, no. But they will fix it.”

Half Of Pre-Retirees Risk Significant Shortfalls

Almost half of Australians between the ages of 50 and 70 are at risk of falling short of a comfortable retirement, according to new research released by MLC.

The research explored the thoughts and habits of the “forgotten” low super balance Boomers, and revealed nearly half (43 per cent) of those surveyed admitted to having a superannuation balance of less than $100,000.

Additionally, 33 per cent of this age group reported having $50,000 or less in their super account, falling extremely short of what is recommended a single retiree needs for a comfortable retirement (over $545,000).

Lara Bourguignon, General Manager of Customer Experience, Superannuation at MLC, believes that all Australians should enjoy retirement – regardless of their financial situation.

“Australia has a high level of poverty among retirees, and we believe that super is one of the greatest tools we have to change this.”

“While these results are concerning, we want to remind people in this age group that it’s not too late for them to take action and better understand their holistic wealth position as they prepare for retirement.”

Ms Bourguignon said there are a number of steps Australians can take to maximise their super balance in their final years of work, and to structure their portfolios to make the most of what they do have when they’re in retirement.

“For example, we know some of the people in this age group have other assets such as property in their name beyond super, which is an important factor for them to consider when planning for retirement.”

“If they don’t have other assets, engaging with their super fund may prove to be a cost effective way for them to access advice in lieu of seeing a financial adviser,” Ms Bourguignon said.

Of those with a retirement saving of under $100,000, the research also revealed 42 per cent only became concerned about the balance of their retirement savings in their 50s, while over 30 per cent admitted they never checked their super balance.

“Sticking your head in the sand will often lead to unnecessary stress”.

APRA could have investigated CBA years ago

From The Conversation.

The Australian Prudential Regulation Authority (APRA) has become the second regulator to independently investigate the Commonwealth Bank of Australia. Experts say the inquiry puts the regulator in the tricky position of being tough on bank scandals but juggling its close relationship with the government and the CBA.

The inquiry follows civil proceedings launched against the bank for being complicit in money laundering.

“APRA cannot leave this deterioration in the public’s trust and confidence in our banks to fester for any longer,” says Eliza Wu, from the University of Sydney.

The investigation will be run by an independent panel, appointed by APRA. It will run for six months after which the regulator will receive a final report, to be made public.

The inquiry focus will be on governance, culture and accountability frameworks at the CBA. APRA Chairman Wayne Byres said:

A key objective of the inquiry will be to provide CBA with a set of recommendations for organisation and cultural change, where that is identified as being necessary.

The inquiry will have the power to compel CBA employees to provide information at its request, notwithstanding anything to the contrary in a confidentiality agreement. But it will not have the power to compel witness statements from people outside the organisation, which a royal commission would have.

The government has come out in support of the inquiry. But the timing of the response has raised questions about whether the regulator should have acted sooner.

“Morrison has stated that APRA is independent, and that this is APRA’s decision, not his. But the timing raises questions in light of the Treasurer’s obvious pique, motivated no doubt by the political capital that the Turnbull government has expended resisting a royal commission – no mean feat for a government with a one seat majority and trailing badly in the polls,” says Andy Schmulow, from the University of Western Australia.

APRA’s ability to prosecute the CBA relies on prudential standards which set out minimum foundations for good governance. But Schmulow says APRA has had many opportunities to investigate this, since its introduction in 2015.

“The question is whether APRA’s announcement of an inquiry should have come earlier – possibly years earlier – and if so whether APRA’s announcement today is mere coincidence, or whether it is responding to pressure from the Treasurer,” he says.

Academics agree that APRA is the best agency to run an inquiry on the CBA, due to the agency’s close relationship with the banks and knowledge of the industry.

“APRA is really the only agency which could do it. It already has a team focused on each of the banks. None of the other agencies has any deep knowledge of how banks work,” says Rodney Maddock, from Monash University.

“The banks and the regulators are involved in regular two-way conversations. Such interaction is essential to the way Australia supervises its banks, rather than launching legal cases at each other. Most countries regard our regulatory model as one of the best in the world.”

The CBA has faced a series of scandals involving its insurance and financial advice and planning arms and most recently for not complying with the Anti-Money Laundering and Counter-Terrorism Financing Act.

The inquiry puts the regulator in a difficult trade-off in dealing with threats to financial security and creating unfair competition, if its perceived to be focusing too much scrutiny on one bank.

“If APRA is not seen to be asking serious questions into how this could have come about and to conduct a critical evaluation of CBA’s risk management framework and the checks and balances that are meant to be in place, there is a danger that depositors may start pulling out their savings… we end up with a liquidity drainage out of our banking system and a major disruption to credit supply,” Eliza Wu says.

CBA is the largest bank in Australia by total assets and by the amount of deposit funding that it has.

The inquiry might also have ramifications for other cases yet to be launched by international regulators against the bank.

“Reports indicate that Hong Kong and Malaysian authorities are requesting information from CBA about cross-border anti-money laundering and counter terrorism failures. What would be of even greater concern is that any transactions that involve US dollars would have to go through and be cleared in New York, and in the past the US authorities have taken steps against, among others, Australian entities for illegal conduct. This includes conduct that went nowhere near the US. So this potentially opens multiple battle fronts for CBA both foreign and domestic,” says Andy Schmulow.

Author: Jenni Henderson, Editor, Business and Economy, The Conversation

How governments have widened the gap between generations in home ownership

From The Conversation.

Various government policies have fuelled the demand for housing over time, expanding the wealth of older home owners and pushing it further and further beyond the reach of young would-be home buyers. A new study highlights this divide between millennials and their boomer parents.

The study is part of a Committee of Economic Development of Australia (CEDA) report called Housing Australia. It compares trends in property ownership across age groups over a period of three decades.

Between 1982 and 2013, the share of home owners among 25-34 year olds shrunk the most, by more than 20%. On the other hand, the share of home owners among those aged 65+ years has risen slightly.

The rate of renting has spiralled among young people. By 2013, renting had outstripped home ownership among 25-34 year olds.

Same policies, different impacts on generations

There is undoubtedly a growing intergenerational divide in access to the housing market. The timing of policy reforms has been a major driver of this widening housing wealth gap.

Negative gearing has long advantaged property investors, potentially crowding out aspiring first home buyers. While negative gearing was briefly quarantined in 1985, this was repealed after just two years.

The appeal of negative gearing grew as financial deregulation spread rapidly during the 70s and 80s. This deregulation widened access to mortgage finance, but also pushed real property prices to ever higher levels.

In 1999, the Ralph review paved the way for the reform of capital gains tax on investment properties. Instead of taxing real capital gains at investors’ marginal income tax rates, only 50% of capital gains were taxed from 1999 onwards, albeit at nominal values.

The move, designed to promote investment activity, actually aggravated housing market volatility. The confluence of negative gearing benefits and the capital gains tax discount encouraged investors to go into more debt to finance buying property, taxed at discounted rates. The First Home Owners Grant, introduced in 2000, was another lever that increased demand. In the face of land supply constraints, these sorts of subsidies were likely to result in rising house prices.

Other policy reforms, while not directly housing related, have also affected young people’s opportunities to accumulate wealth.

The Higher Education Contribution Scheme (HECS) was introduced in 1989, at a time when many Gen X’s were entering tertiary education. This ended access to the free education that their boomer parents enjoyed.

HECS parameters were tightened over time. And in 1997, HECS contribution rates rose for new students and repayment thresholds were reduced.

Of course, the 1992 introduction of the superannuation guarantee would have boosted Gen X’s retirement savings relative to boomers. However, these savings are not accessible till the compulsory preservation age, so can’t be used now to buy a house.

All these policies have clearly had varying generational impacts, adversely affecting home purchase opportunities for younger generations while delivering significant wealth expansion to older home owners.

An intergenerational housing policy lens

A new housing landscape has emerged in recent years. It is marked by precarious home ownership and long-term renting for young people.

It’s also dominated by a growing wealth chasm – not just between the young and old – but also between young people who have access to wealth transfers from affluent parents and those who do not.

The majority of housing related policies do not consider issues of equity across generations. There are currently very few examples of potential housing reforms that can benefit multiple generations.

However, there is one policy that could – the abolition of stamp duties. It would remove a significant barrier to downsizing by seniors.

The equity released from downsizing would boost retirement incomes for seniors, while freeing up more housing space for young growing families. Negative impacts on revenue flowing to government could be mitigated by a simultaneous implementation of a broad based land tax. This would in turn push down house prices.

As life expectancies increase, the need for governments to take into account policy impact on different generations is critical. On the other hand, policies that take a short-term view will only worsen intergenerational tensions and entrench property ownership as a marker of distinction between the “haves” and “have nots” in Australia.

Author: Rachel Ong, Deputy Director, Bankwest Curtin Economics Centre, Curtin University

Low levels of trust, confidence and transparency in the banking industry – ABA

The Australian Bankers’ Association has today released new research that measures and tracks community trust and confidence in banks.

Less than one third of those surveyed had high levels of trust in the banking industry. This is below the international benchmark.

There are significant differences in attitude between those who have higher levels of trust, and those who do not. Those with low trust scores believed the banks were drive by profit, not focussed on customer needs and had terms and conditions which are not transparent.

The research conducted by international firm Edelman Intelligence will be used by the industry to assess the impact of the wide ranging reform agenda currently underway across the sector.

“The research shows low levels of trust, confidence and transparency in the banking industry with a clear need for improvement,” according to ABA Chief Executive Anna Bligh.

“Interestingly, survey respondents report stronger levels of trust with their own personal banking experience (53 per cent) than they do with the industry as a whole (31 per cent).

“This points to a real opportunity for banks to translate the experience customers have with their own bank into higher levels of trust in the sector as a whole,” she said.

The Edelman Intelligence research has also measured the community’s knowledge of current industry-led banking reforms and their views of these reforms.

“While awareness of the reforms is low, respondents have a clear view that the reforms are on the right track to improve banking culture and customer experience,” Ms Bligh said.

“It is heartening that while challenges lie ahead for banks, customers are receptive to banks’ massive reform program.

“As a result of more than 20 inquiries, reviews and investigations into banks in the past two years, Australia’s banks are now implementing one of the largest reform programs in their history.

“Along with Federal Government reforms such as the new Banking Executive Accountability Regime, a new one-stop shop for complaints and substantial improvements to contracts for small business lending, the industry has initiated its own reforms which include a new Code of Banking Practice, new whistleblower protections and changes to staff remuneration.

“It’s a big program of transformation and future benchmarking will look at the full breadth of changes that are underway,” Ms Bligh said.

Anna Bligh will today outline to the Good Shepherd Microfinance Conference in Melbourne the importance of measuring and benchmarking trust in banks.

“It is critical to the whole banking industry that real progress is made in rebuilding trust and respect with the community,” she said.

“The fact that this research has been done, that it is being set as a tangible benchmark and being made public, is an indication the banking sector is serious about reform and prepared to be held accountable.”

Key findings from the report include:

  • When asked to rate the importance of the initiatives in making banking better, each initiative scored between 62 and 75 per cent.
  • The initiatives that will have the greatest impact on trust are strengthening the Code of Banking Practice and changing the way bank staff are paid.
  • Respondents are most aware of actions their main bank has taken in relation to the removal of individuals from the industry for poor conduct (53 per cent), followed by a strengthening of commitment to the Code of Banking Practice (51 per cent).
  • Based on the 2017 Edelman Global Trust Barometer, Australians’ trust in the financial services sector has increased slightly, but is still four points behind the global average.

“Banks are trusted when they’re considered stable, well-regulated and reliable. This research shows just how much more work needs to be done before trust in bank culture and conduct reach stronger levels than seen in this research,” Ms Bligh said.

“The research will be conducted regularly to assess progress and identify areas for further reform.”

The Edelman Intelligence research consisted of an online survey of 1,000 Australians and 12 focus groups between May and June 2017. More information is available in the report.

Auction Volumes Rise Across the Combined Capital Cities

From CoreLogic.

Auction activity increased across the combined capital cities this week, with 2,239 homes taken to auction; the largest number of auctions held since the first week of June. The larger volume of auctions returned a preliminary auction clearance rate of 71.1 per cent, up from last week’s final results when 2,064 auctions were held and 69.8 per cent cleared.

Over the corresponding week last year, the clearance rate was 74.5 per cent and 2,153 auctions were held. It is expected as more results are collected that the final auction clearance rate will revise lower to remain within the high 60 per cent range, where clearance rates have been tracking since early June. Melbourne saw a higher volume of auctions this week (1,116), however the clearance rate for the city fell to 73.8 per cent, while Sydney’s preliminary clearance rate increased to 71.6 per cent across a higher volume of auctions week-on-week (814).

2017-08-28--auctionresultscapitalcities

Long Term Mortgage Delinquencies Rise

The latest S&P data shows that mortgages more than 90 days in arrears increased to 2.20% in June from 2.10% the previous month, despite a seasonal easing. Loan balances continue to grow.

From Australian Broker.

The volume of delinquent housing loans underlying Australian prime residential mortgage-backed securities (RMBS) has dropped from 1.21% to 1.15% between May and June, according to S&P Global Ratings.

While S&Ps report, RMBS Arrears Statistics: Australia, stated that arrears usually fall month-on-month at this time of year, analysts also attributed the decline to an increase in outstanding loan balances in June.

Declines were experienced across the board with the Standard & Poor’s Performance Index (SPIN) falling for prime Australian mortgages in arrears by over 30, 60 and 90 days.

Queensland experienced the largest decline in arrears in percentage terms falling from 1.72% to 1.62% between May and June. At the other end of the spectrum, Western Australia retained top place with arrears at 2.32%.

Looking at the type of lenders, arrears fell in all categories except ‘regional banks’ which recorded an increase in the number of delinquencies from 2.27% to 2.30%.

“The SPIN for nonconforming home loan arrears fell to 4.84% in June from 5.16% in May against a backdrop of increasing loan balances. The largest improvement was for loans 60-90 days in arrears, which fell 0.31 percentage point to 0.78% in June. Mortgages more than 90 days in arrears increased to 2.20% in June from 2.10% the previous month, however.”