SYDNEY, Australia – Macquarie Bank approves a wide range of interest cuts for interest-only investors’ home loans on Tuesday. The slash on the home loan rates enacted reaches up to 55 basis points.
On Tuesday, Macquarie Bank announces a time-high 55 basis points cut on interest-only investors’ home loan interest rates. This interest cut includes a 55 basis point cut to a 2.89 per cent p.a., with a 3.30 per cent p.a. comparison rate for the basic fixed investment of 1 year interest-only. For interest-only investors with basic fixed investment of 2 years, the basis point cut to per annum rate is the same, making p.a. comparison rate at 3.26 per cent. These rates only apply for lenders with a maximum of 80% loan-to-value ratio. Macquarie Bank also slashed home loan interests for other loan types, including those with attached offset accounts, by 10 to 55 basis points.
According to Macquarie’s management, this move responds to the growing demand of the Australian market in being critical on budgeting and expenses, especially for home loans.
With the eased COVID-19-related restrictions in many states and regions starting the month of July July, home loan commitments also plummeted. These figures come from the latest Australian Bureau of Statistics (ABS) released data.
According to the institution’s latest released data, investor housing’s new loan commitment values increased to 3.5 per cent. On the other hand, owner-occupier housing loan commitments are at a higher 10.7 per cent. New loan commitments for first home owner-occupier buyers also jumped up to 14.4 per cent. As per head of Finance and Wealth of ABS, these rates are at an all-time high in the series’ history.
However, the Australian Prudential Regulation Authority (APRA) also warned of deferred home loans’ total value in Australia in July. In the data released by the prudential regulator, Macquarie ties with Westpac and Bendigo Bank at the first spot for risk profiles in the percentage of the banks’ loan deferrals. Macquarie has over one out five of interest-only loans deferred in as of July. On the flip side, Macquarie’s loans with 90 per cent and above LVR remains the strongest out of the region’s other bank loan giants, having only deferred loans at 3 per cent. The total deferred loans of Macquarie is at about one out of ten, aligned with the total Australian market.
However, Westpac’s credit strategy team ensures “more interesting” figures for August and September since the reports will no longer reflect key losses for the prominent banks in the first two quarters of the year.
Even given the following data, banks still have to be wary of a potential cliff at hand. Expectations on better loan values and statistics are still at risk, especially towards this year’s remaining months. Just this week, the reputed credit rating agency Moody’s warned of an expected rise on loan ‘delinquencies’ or those loans that remain in arrears for 30 days or more.
This increase may be the result of the worldwide economic spinoff caused by the COVID-19 pandemic. The Residential Mortgage-Backed Securities (RMBS) supports a large portion of home loans in Australia. With the increase of deferred loans, investors also become critical of risks, affecting overall funding.
Moody’s further explains that the anticipated increase in home loan delinquencies is also grounded on the lower RMBS delinquencies recorded in June of this year. During the previous months, the government enacted relief measures, ease of monetary policies, and payment deferrals as a support during the peak of the pandemic crisis. This government support might also be the reason why there is a boom in new loan commitments as of July, as per ABS. These government efforts are set to cease come the remaining months of the year slowly.
Although deferred accounts do not count as delinquencies, these accounts will be tagged ‘delinquent’ once the lenders fail to continue payments. Moody’s set a fair warning to banks that a significant number of government-supported lenders will not have the means to continue their home loan payments once the loan deferrals expire. The increase of delinquent lenders will cause a wide-ranged cliff in the industry.
Furthermore, the Standard and Poor’s (S&P), a credit rating agency, also released data suggesting that non-banks have lower deferral loan numbers than key banks. The data anchors in the massive source of COVID-19 relief in the mortgage securities space.
The data reveals that in the pool of mortgages of some major banks’ securities in the RMBS sector, there is an average of 7.1 per cent of home loan deferrals. Regional banks have higher deferrals or form of reliefs at an average of 10.4 per cent from 8.3 per cent in April.
On the other hand, non-banks recorded lower home loan deferrals or reliefs, with values only reaching 6.2 per cent.
In statistics, the highest delinquency rates recorded are in Western Australia at 2.61 per cent and the Northern Territory with 2.59 per cent.
For low documentation home loans, delinquencies dating 90 days and above reached 4.38 per cent, while arrears also rose to 6.52 per cent.
In June of this year, ABS recorded a substantial rise in small and medium-sized business lending before it decreased in July. The increase of small business loans in June resulted in a drastic fall in July, with APRA revealing 17 per cent of total deferred loans that amount to 55 billion dollars.