Market sentiment turns
There was a sizeable shift in overnight markets, with the Federal Reserve likely to have delivered its final interest rate hike, the oil price dropping to $68 - well down from $83 less than a month ago - and futures markets beginning to price significant easing.
In Australia, CBA, NAB, Westpac and others think we have no reached the peak of the interest rate cycle, with most expecting rate cuts over the next 18 months.
Futures markets are now expecting something similar.
This situation has echoes of mid-2008, when the inflation was still well above target, yet within a year the RBA had delivered 425 basis points of interest rate cuts.
NAB's share price was punished today on the release of its latest results, with mortgage arrears now rising and the executive practically begging regulators to reduce the 300 basis lending serviceability buffer, which is limiting the flow of credit for first homebuyers, new home sales, investors, and would-be home builders.
NAB noted that 1 in 5 of its borrowing customers were effectively 'mortgage prisoners' unable to refinance to better terms.
Property Podcast
I was joined by Dr. Cameron Murray on the Australian Property Podcast to answer the following simple conundrum: why don't we just build more houses?
Tune in here to find out his thoughts (or click on the image below):
And you can watch on Youtube here: