Tag: Mortgage Industry

Home Lending Booms: But What Have They Got To Hide?

The ABS released their monthly lending indicators for September today, and it showed a strong uptick in new mortgage loans, in contrast to poor household spending trends and confidence overall, though as we will see there are questions about this dataset too. Significantly, we also note the ABS is about to terminate its monthly reporting of new loans data, saying the monthly Lending Indicators publication will transition to a quarterly release.

My observation is different because the monitoring of new loans for housing is an essential barometer for the economy, without the monthly data it will be easier for lenders to continue their push to reduce lending standards (something evidently being supported by the opposition party) and so drive home prices even higher.

So credit for home lending, especially investors is booming. Worth recalling here the RBA’s recent warning that falling interest rates could trigger a property price boom that encourages households to take on too much debt.

As you know my surveys highlight some households are under extreme financial pressure, and I will be discussing this in my live show next Tuesday, so official data on household spending, is also an important indicator. So conveniently, the ABS also released household spending data for August today. However, I have issues with these figures too as this data excludes, Rent and other dwelling services, Electricity, gas and other fuels, Communication Services, Education Services and Insurance and other financial services. IN other words, the spending data is partial and incomplete, and excludes more than half of a typical mortgaged or renting household.

So all up, the spending indicators are not really meaningful, yet the ABS will be enhancing the Monthly Household Spending Indicator and ceasing the Retail Trade publication after the June 2025 reference period. On the other hand, the data on lending will be only released four times a year.

This is another example of data not fit for purpose, and I assume the financial pressure the ABS is under. But it does beg the question. What have they got to hide – and who is pulling their strings?

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Home Lending Booms: But What Have They Got To Hide?
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Broken City!

Home builders are falling off the perch at an alarming rate with high rates of insolvency among construction firms, many of whom were homebuilders, to 3,000 in the past year. While many of these were small firms, we are still seeing a spate of larger firms going under. We are encountering more people in our 1:1 discussions with people coping with half built projects, no builder to take over the work, rising costs and blown out completion dates. No wonder people prefer to buying existing property.

The latest quarterly data on the value of construction work done also fell by 0.1% over Q2 to be 2.9% lower year-on-year.

More broadly, The Albanese Government is a complete mess on housing with the three bills that comprise its $32bn Housing for Australia plan blocked in the senate. These include The Help to Buy shares equity scheme. The Housing Future Fund equity investment vehicle to build just 13,000 houses per year. And the Build to Rent legislation which is designed to assist corporate to get tax breaks to build and then rent units, probably at higher than market rents. After all they are designed to make profits for those investing corporates and superfunds.

Prime Minister Anthony Albanese has threatened to use the Senate’s obstruction of Help to Buy as a trigger for a double dissolution election. Welcome to that time of the political cycle where we find ourselves burrowing into the election date speculation rabbit hole.

The real fix of course is to cut immigration significantly, as this would ease the rental shortage and lower rental inflation; which in turn would take pressure off the RBA to hold rates higher for longer enabling builders to clear the huge backlog of approvals and easing pressure on households. And on that front, Moody’s says that Australian mortgage delinquency rates, which increased over the June quarter, will continue to rise moderately over the rest of this year as high interest rates and sticky inflation put financial stress on households.

Standing back, the policy errors made by the current government are literally hitting home, and with the prospect of more political tricks on all sides of politics, the real impact on people will continue. They should be held to account for their mistakes.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts

Today’s post is brought to you by Ribbon Property Consultants.

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
Broken City!
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Broken City!

Home builders are falling off the perch at an alarming rate with high rates of insolvency among construction firms, many of whom were homebuilders, to 3,000 in the past year. While many of these were small firms, we are still seeing a spate of larger firms going under. We are encountering more people in our 1:1 discussions with people coping with half built projects, no builder to take over the work, rising costs and blown out completion dates. No wonder people prefer to buying existing property.

The latest quarterly data on the value of construction work done also fell by 0.1% over Q2 to be 2.9% lower year-on-year.

More broadly, The Albanese Government is a complete mess on housing with the three bills that comprise its $32bn Housing for Australia plan blocked in the senate. These include The Help to Buy shares equity scheme. The Housing Future Fund equity investment vehicle to build just 13,000 houses per year. And the Build to Rent legislation which is designed to assist corporate to get tax breaks to build and then rent units, probably at higher than market rents. After all they are designed to make profits for those investing corporates and superfunds.

Prime Minister Anthony Albanese has threatened to use the Senate’s obstruction of Help to Buy as a trigger for a double dissolution election. Welcome to that time of the political cycle where we find ourselves burrowing into the election date speculation rabbit hole.

The real fix of course is to cut immigration significantly, as this would ease the rental shortage and lower rental inflation; which in turn would take pressure off the RBA to hold rates higher for longer enabling builders to clear the huge backlog of approvals and easing pressure on households. And on that front, Moody’s says that Australian mortgage delinquency rates, which increased over the June quarter, will continue to rise moderately over the rest of this year as high interest rates and sticky inflation put financial stress on households.

Standing back, the policy errors made by the current government are literally hitting home, and with the prospect of more political tricks on all sides of politics, the real impact on people will continue. They should be held to account for their mistakes.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts

Today’s post is brought to you by Ribbon Property Consultants.

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The Mortgage Stress Pigeons Coming Home To Roost!

Those following the DFA channel will know we have been tracking the rise of mortgage stress in recent times, as the higher interest rates and prices bite while real incomes stalled. I have been listing some of those post codes, like Liverpool in Sydney or DonnyBrook in Melbourrne, where we have been measuring cash flow pressures on households building.

Of course, the banks have been extending and pretending, offering households the chance to extend the term of their loan, or go interest only for a period. Initially people who were over committed reached for this lifeline, but as the recent ASIC report said, this often just put off taking hard decisions about selling up while you can. Many households are making this call now, and I expect property listings to rise in the months ahead as a result.

However, up to now the number of mortgagee sales has been very low, first because of the extend and pretend strategy, second because some households do decide to sell before they are forced to and thanks to recent price rises get to replay the bank and move on. But eventually the mortgagee sales worm will turn, as interest rates stay higher for longer and as lenders, especially from the Non-Bank sector get tough.

But now we are seeing this discussed in the press, with Realestate.com.au reporting Millions of dollars worth of Aussie homes have been seized for mortgagee sales from McMansions to townhouses and inner city apartments as data shows 100 suburbs in trouble.

However, I think more accountability should be taken by the RBA for its poor monetary policy decisions, the government for pumping migration and lenders for lending way too much and the industry for frankly telling porkies.
But at the end of the day, it is individual households who are caught in the vice, and are having to make hard decisions about their financial futures.

We will be releasing the next edition of our stress analysis in a few days, look out for that, but already I can see that the tax cuts and Government handouts are only providing limited short-term relief for some, so I effect more defaults in the months ahead.

I hate to be proved right on this, but I think I will be!

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Find more at https://digitalfinanceanalytics.com/blog/ where you can subscribe to our research alerts

Today’s post is brought to you by Ribbon Property Consultants.

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
The Mortgage Stress Pigeons Coming Home To Roost!
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The Mortgage Stress Pigeons Coming Home To Roost!

Those following the DFA channel will know we have been tracking the rise of mortgage stress in recent times, as the higher interest rates and prices bite while real incomes stalled. I have been listing some of those post codes, like Liverpool in Sydney or DonnyBrook in Melbourrne, where we have been measuring cash flow pressures on households building.

Of course, the banks have been extending and pretending, offering households the chance to extend the term of their loan, or go interest only for a period. Initially people who were over committed reached for this lifeline, but as the recent ASIC report said, this often just put off taking hard decisions about selling up while you can. Many households are making this call now, and I expect property listings to rise in the months ahead as a result.

However, up to now the number of mortgagee sales has been very low, first because of the extend and pretend strategy, second because some households do decide to sell before they are forced to and thanks to recent price rises get to replay the bank and move on. But eventually the mortgagee sales worm will turn, as interest rates stay higher for longer and as lenders, especially from the Non-Bank sector get tough.

But now we are seeing this discussed in the press, with Realestate.com.au reporting Millions of dollars worth of Aussie homes have been seized for mortgagee sales from McMansions to townhouses and inner city apartments as data shows 100 suburbs in trouble.

However, I think more accountability should be taken by the RBA for its poor monetary policy decisions, the government for pumping migration and lenders for lending way too much and the industry for frankly telling porkies.
But at the end of the day, it is individual households who are caught in the vice, and are having to make hard decisions about their financial futures.

We will be releasing the next edition of our stress analysis in a few days, look out for that, but already I can see that the tax cuts and Government handouts are only providing limited short-term relief for some, so I effect more defaults in the months ahead.

I hate to be proved right on this, but I think I will be!

http://www.martinnorth.com/

Calibrating The Real Impact Of Households’ “Financial Relief”…

Today we look at the real impact of the recent Government support initiatives for households, as we update our models to the end of July, and adjust the tax bands, income changes, extra cost of living support and other initiates from both state and federal governments.

Actually, while there were some improvements, not all households benefitted equally, so we look at the data at a state, segment and post code level, to see who befitted the most.

On Tuesday 13th August we will run a live show on this topic and do an even deeper post code dive.

http://www.martinnorth.com/

DFA One To One

Go to the Walk The World Universe at https://walktheworld.com.au/

Today’s post is brought to you by Ribbon Property Consultants.

How Do We Know That Mortgage Arrears Are Now Rising In Australia?

The latest RBA bulletin, just released, contained a couple of significant articles relating to mortgage arrears and serviceability. The first, “Recent Drivers of Housing Loan Arrears” shows that Housing loan arrears rates have increased from low levels since late 2022, with banks expecting them to rise a bit further from here. High LVR and DTI loans are most at risk. No surprise there.

The second, “How the RBA Uses the Securitisation Dataset to Assess Financial Stability Risks from Mortgage Lending” makes the point that the data used relating to around one third of loans, contains lags of up to 2 years especially for highly leverage loans, which limits the usefulness of that dataset.

Securitisation data collected by the RBA, forming the Securitisation Dataset, on residential mortgage-backed securities (RMBS) as a condition for eligibility as collateral in repurchase agreements with the RBA. These loan-level data are provided monthly, and are both timely and granular. The data provide detailed information about each loan that can be used to help form a view of financial health among mortgagors. As lenders can face incentives to select certain types of loans for securitisation or ensure the performance of loans after issuance, the data may not be fully representative of all mortgages in the Australian market. In other words, the loans are hand-picked for securitisation.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
How Do We Know That Mortgage Arrears Are Now Rising In Australia?
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How Do We Know That Mortgage Arrears Are Now Rising In Australia?

The latest RBA bulletin, just released, contained a couple of significant articles relating to mortgage arrears and serviceability. The first, “Recent Drivers of Housing Loan Arrears” shows that Housing loan arrears rates have increased from low levels since late 2022, with banks expecting them to rise a bit further from here. High LVR and DTI loans are most at risk. No surprise there.

The second, “How the RBA Uses the Securitisation Dataset to Assess Financial Stability Risks from Mortgage Lending” makes the point that the data used relating to around one third of loans, contains lags of up to 2 years especially for highly leverage loans, which limits the usefulness of that dataset.

Securitisation data collected by the RBA, forming the Securitisation Dataset, on residential mortgage-backed securities (RMBS) as a condition for eligibility as collateral in repurchase agreements with the RBA. These loan-level data are provided monthly, and are both timely and granular. The data provide detailed information about each loan that can be used to help form a view of financial health among mortgagors. As lenders can face incentives to select certain types of loans for securitisation or ensure the performance of loans after issuance, the data may not be fully representative of all mortgages in the Australian market. In other words, the loans are hand-picked for securitisation.

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

As More Households Are Crushed, Bankers Talk Their Own Book On Easing Mortgage Lending Rules!

Guess what, Bankers are looking at ways to ease lending standards to pump the market some more, as bank margins are under pressure at a time when lending growth is already strong, and more households are already in financial difficulty.

The value of new housing loans have risen by 17.9% since March 2023, to $27.6 billion dollars and were up 3.1% in March, according to the ABS.

The ABS also released their latest estimates of real living costs for households, they said Employee households recorded the largest annual rise in living costs of all household types with a rise of 6.5 per cent,

No surprise then that the DFA surveys for April showed a further rise in mortgage stress, to more than half of mortgaged borrowers, with many first-time borrowers and young growing families most exposed. In addition, rental stress remains very high, underscoring the pressures created by bad policy over many years, making housing unaffordable. On my live show coming up on Tuesday, we will look at this is more detail, and do a further post code deep dive.

AMP chief economist Shane Oliver says there might be scope to reduce buffers for people refinancing — the banks already have some room to do that — but cautions against significant changes to lending laws.

“We’ve gone through a very difficult time in the economy in terms of the massive rise in interest rates, and we’ve come through — so far anyway — at a relatively low level of arrears,” he notes.

“That partly reflects the responsible lending that the banks have been undertaking over the last few years. If we had to take a dramatic easing in lending standards, and the rules around that, the risk is that the next cycle could be far worse.”

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/

Digital Finance Analytics (DFA) Blog
Digital Finance Analytics (DFA) Blog
As More Households Are Crushed, Bankers Talk Their Own Book On Easing Mortgage Lending Rules!
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As More Households Are Crushed, Bankers Talk Their Own Book On Easing Mortgage Lending Rules!

Guess what, Bankers are looking at ways to ease lending standards to pump the market some more, as bank margins are under pressure at a time when lending growth is already strong, and more households are already in financial difficulty.

The value of new housing loans have risen by 17.9% since March 2023, to $27.6 billion dollars and were up 3.1% in March, according to the ABS.

The ABS also released their latest estimates of real living costs for households, they said Employee households recorded the largest annual rise in living costs of all household types with a rise of 6.5 per cent,

No surprise then that the DFA surveys for April showed a further rise in mortgage stress, to more than half of mortgaged borrowers, with many first-time borrowers and young growing families most exposed. In addition, rental stress remains very high, underscoring the pressures created by bad policy over many years, making housing unaffordable. On my live show coming up on Tuesday, we will look at this is more detail, and do a further post code deep dive.

AMP chief economist Shane Oliver says there might be scope to reduce buffers for people refinancing — the banks already have some room to do that — but cautions against significant changes to lending laws.

“We’ve gone through a very difficult time in the economy in terms of the massive rise in interest rates, and we’ve come through — so far anyway — at a relatively low level of arrears,” he notes.

“That partly reflects the responsible lending that the banks have been undertaking over the last few years. If we had to take a dramatic easing in lending standards, and the rules around that, the risk is that the next cycle could be far worse.”

http://www.martinnorth.com/

Go to the Walk The World Universe at https://walktheworld.com.au/