AFR Article_ 09.02.2022

Australia and New Zealand Banking Group’s mortgage market woes got worse in December, despite assurances late last year that the bank would return to growth this half.

Data from the Australian Prudential Regulatory Authority showed ANZ went backwards 0.1 per cent in the owner-occupier housing market and saw the same marginal growth of 0.1 per cent in investor mortgages compared with November.

ANZ chairman Paul O’Sullivan told shareholders in November that the bank expected its Australian home loan portfolio to return to growth in this half, and for ANZ’s growth to be in line with system growth some time in the second half of this financial year.

National Australia Bank recorded the strongest month-on-month increase of the big four banks at 1.6 per cent across both investor and owner-occupier mortgages. Macquarie Bank continued its strong trajectory, up 5.2 per cent, while Westpac continued to retreat from investor mortgages, down 0.7 per cent compared with November.

RateCity director of research Sally Tindall said investor mortgage growth had slowed across the board, despite record high levels overall.

‘‘The value of investor loans hit another record high this month, but the pace has notably slowed, which could be sign some of the heat is coming out of the market,’’ she said.

Macquarie analysts said in a note that overall housing credit grew at 8.7 per cent on an annualised basis over the three months to December 31.

‘‘On a three-month annualised view, Commonwealth Bank of Australia and National Australia Bank are growing at 1.3 times and 1.6 times system respectively, while ANZ is showing no growth,’’ Macquarie said.

Outside of the majors, Bank of Queensland recorded growth of 1.2 times system on the back of ME bank’s stronger volume growth in the past month, Macquarie said.

RateCity said the banks had increased their fixed rates by as much as 1 per cent or more over the past year. They were likely to move on standard variable rates even if the Reserve Bank of Australia, which left rates steady yesterday, keeps the cash rate on hold at 0.1 per cent for the rest of 2022.

‘‘Even if the RBA holds out until 2023, there’s a strong chance lenders will hike variable rates regardless, particularly if funding costs continue to escalate,’’ Ms Tindall said.

‘‘A series of cash rate hikes, whenever they come, are likely to put a handbrake on our property market. Anyone borrowing at capacity will see their budget shrink, which could be enough to cool things down, particularly in property hotspots.’’

Ms Tindall also warned that more than a million homeowners have never experienced a rate rise.

‘‘It’s incredible to think there are well over 1.1 million households that have never experienced a cash rate hike,’’ she said. ‘‘Australia hasn’t seen an RBA rate rise in more than 11 years, which means there is a generation of mortgage holders who could be in for a shock when their monthly repayments automatically start rising.’’

Analysts have warned growth in the home loan market would start to slow this year, as credit conditions tighten.

‘‘While most people will be able to take future rate hikes on the chin, albeit through gritted teeth, some people who have been hit hard financially by COVID or who haven’t seen a decent pay rise in some time could find it difficult to balance the budget,’’ Ms Tindall said. ‘‘The data shows the mortgage market is still in full swing. However, future rate rises could shake things up.’’