Tight lending bites
Westpac reported a big hit to earnings today on remediation and restructuring items.
30 day mortgage arrears increased to 159 basis points from 144 basis points a year earlier, still mainly driven by Western Australia.
The stock of interest-only mortgages continued to run down, to be 24.9 per cent of the total (Westpac was formerly the king of IO lending).
And it looks as though the peak of high-rise apartment completions is happening right now, especially in Sydney and Melbourne.
And here is some statistical support for my contention that tough lending standards are becoming counter-productive, with dwelling turnover at the lowest level in Australia's history, impeding social and labour force mobility.
Source: Westpac
With very little high-LVR or low-doc lending around these days, and more forced amortisation of loans, this is set to suck consumption out of the economy, possibly leading to an extended period of negative economic growth in per capita terms.
Source: Westpac
Even if the Reserve Bank cuts its cash rate tomorrow - which it may not - this will not readily help to bring housing market investors back to the fore.
Counter-intuitively, and illogically, a lower borrowing rate can reduce the capacity of investors to borrow due to the way in which add-backs for net rental losses are calculated.
On the plus side mortgage serviceability for new buyers is roughly back in line with the 30-year average according to Westpac's index, and the 'time to buy' index has improved significantly.
But that's only good news if people can actually borrow.
