Australian Housing market crisis - Buyers of 2nd homes squeezing young people out of property market.
Add in the requirement from regulator APRA that banks hold more capital to protect against a crisis and there are strong signs that borrowers will soon be slugged.
Finance analyst Martin North said he expected the big lenders to continue lifting rates this year, even if the RBA cash rate stayed at a record-low 1.5 per cent.
“The real conversation here is not what the RBA does because the official cash rate has very little to do with what real mortgage holders are experiencing. We have already seen, and we will see more, out-of-cycle interest rate rises,” Mr North told The New Daily.
Much of the recent media focus has been on a crackdown by CBA and its subsidiary, BankWest, on investor lending. CBA slammed on the brakes even harder on Wednesday by lifting its interest-only home loan rate, targeted at investors, by 12 basis points to 5.68 per cent.
The average Australian may rejoice at this, as many believe investors squeeze out first home buyers.
The fear, however, is that the big banks, deterred by the regulator from writing too many investor loans and
forced by competitive pressures to leave deposit rates alone, will target owner-occupiers for what Mr North
called “margin repair”.
The bigger concern for Australians is rising variable rates. About 85 per cent of current borrowers are on variable, which means any rise will hit their household budgets immediately.
In a recent research note, JP Morgan identified rising mortgage servicing costs as the “most immediate challenge” facing Australian households.
“But there are other households that are actually up to their gills in debt and have no ability to effectively make those forward bets on the market.
“And it’s not just battlers on the outskirts of cities. There are some younger, more affluent people who have bought high-rise apartments quite recently who’ve got really large mortgages and are highly leveraged and have got almost no other assets.”