Banks threat “accidental results” from their most recent round of mortgage repricing, warn analysts.
Aussie banks may have some close-term earnings increase as an outcome of the recent mortgage rate increases, but their giving increase will probably slow. In addition, the banks’ share price valuations “blow off the chance of accidental results”.
In a conservative evaluation of prospects for the banking sector Morgan Stanley analysts warned the national mortgage market is entering a brand new age, using the banking industry confronting tighter lending standards, higher mortgage rates, more burdensome capital rules, and credit rationing.
Annette Beacher, head of Asia Pacific research at TD Securities, reiterated her view the Reserve Bank should lift interest rates later this season to restrict a possibly “severe macroeconomic correction”.
Beacher believes the regulators’ renewed focus on controlling interest-only mortgage loans is unlikely to hold the “total constant rise in owner occupied debt,” because it affects just a portion of the desire for home, while not changing demand from retirees, self-managed superannuation funds, and foreign buyers.
Unless more extensive macro prudential applications are deployed, a modest rate increase shortly could restrict what may be a serious macroeconomic correction down the track she said.