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Australia's mortgage industrial complex

9 Dec 2021 1 month(s) ago

How are the banks that feed the housing boom faring?

The Australian financial system is heavily dependent on the nexus between the $10 trillion residential property market and the banks that lend the money to fuel the massive mortgages. So looking at how the banks are likely to fare is perhaps the best indicator for where the economy is headed.

Goldman Sachs has had a look at what growth in housing credit growth means. Interestingly, credit growth seems to be stronger with owner-occupiers than investors:

“Housing credit growth remains strong at +0.6% month-on-month (+0.6% in the prior month), with year-on-year growth improving to +6.1% and appears well on track to reach our system housing credit growth forecast of 6.5% by Dec-21.

“Owner-occupier growth remains the driver of total mortgage growth and was +0.8% month-on-month in August (+8.1% year-on-year), while investor lending also improved, now +2.5% year-on-year. Personal credit remains soft, -0.6% mom, with yoy trends running at -5.3%.

Housing credit growth was a lot higher in the 1990s and 2000s, but of course that was from a lower base:

Goldman says Commonwealth is leading the way in lending for housing. Total lending is up 6.1%, and mortgage growth is up 5.1%. CBA is also getting the most deposit growth:

“Total retail deposit growth +1.4% month-on-month and up 9.3% year-on-year. CBA leads the majors on a 3-month annualised basis at 1.2x the system average, followed by ANZ at 1.0x, WBC at 0.9x, and NAB at 0.9x.”

Goldman says ANZ’s 3-month housing growth remains below the average, but business lending has improved and retail deposit growth improved. National Australia Bank’s housing momentum has been steadily improving but its busines lending fell to 1.2 times the system average. Customer deposit growth is also below the system average (0.7).

Westpac has showed continued signs of improvement in WBC’s mortgage performance, while Macquarie Group’s housing momentum remains strong and considerably above system.

Bendigo Bank’s housing growth momentum declined slightly but remained above system, while Bank of Queensland’s housing growth is high, at 1.8 times the system average. Its business lending is low, however.

 

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