Relax the rates says ANZ
Shayne Elliott of ANZ requested that assessment rates for mortgages be revisited since they're too high relative to today's average borrowing rates.
My Twitter feed was the usual mixture of for and against.
The arguments 'against' mainly came from fund managers with short positions, and of course people that want to see the housing market getting a good shellacking.
Their view generally was that reducing the floor rate would be short-sighted, or even irresponsible.
Impacts of the squeeze
I noted the other day that that macroprudential measures can create other distortions, such as reduced consumption due to over-saving for deposits (or amortisation of loans), reduced construction activity, and locking out low income earners from purchasing property.
The reduced turnover in the established housing market can stunt social and labour force mobility, which has adverse implications for productivity.
And there can be a consequent lack of diversification as high deposit requirements and forced amortisation tie up savings into illiquid housing equity, reducing the resilience of mortgagors to shocks for years to come.
That's been the international experience, but is there actually evidence for any of the above in Australia?
Heading down under?
Certainly retail trade has been very weak - turnover was negative for two consecutive months - and renowned high street brands have been going bust at an alarming rate over the past couple of years.
But this isn't necessarily driven by mortgage lending standards, with the rise of online transactions and the 'Aldi-isation' of retail having taken a heavy toll on retailers.
On savings, we previously saw a big run-up in the stock of cash, deposits, and mortgage prepayments.
The household savings rate has lately been squeezed very hard, but as a derived figure it's tough to say what impact the forced amortisation of investor loans is having, except to note that it's having an impact on household cash flows (and increasingly now on mortgage arrears according to the major banks' interim reporting).
The clearest impact has been on stock turnover in the established housing market, which UBS reported is tracking at the lowest level in history at about 3 per cent.
On construction and housing supply, as projects are stalled or cancelled JLL reported in its 1Q19 report a severe decline in newly marketed apartments in Sydney (down 77 per cent), Brisbane (down 59 per cent), and Melbourne (down 51 per cent), predicting a looming rental crunch in two years.
Harry Triguboff of Meriton reported that he was selling only 5 (five) units per week by January 2019, which are recessionary conditions by any other name.
A slowdown in transactions was inevitable, of course, but activity is remarkably low at the moment.
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The cost of living increase for employee household was flat in the March 2019 quarter at 0.0 per cent.
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New Zealand's unemployment rate fell to 4.2 per cent in the March 2019 quarter.
But the employment detail was weak, and rates will probably be cut forthwith.
