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Free AccessUpdate:RBA Kent:Avg Outstanding Mortgage Rate +10bps Since '16
--Updates With Comments From Q&A
By Sophia Rodrigues
SYDNEY (MNI) - Despite a noticeable increase in variable interest rates for
investor loans and interest-only loans over recent months, the average interest
rate paid on all outstanding loans has increased by only about 10 basis points
since late last year, Reserve Bank of Australia Assistant Governor Christopher
Kent said Monday.
Kent made the comments in a speech at a Moody's Analytics Forum here where
he spoke about the insights the RBA has gathered from data on asset-backed
securities that it uses as eligible collateral in domestic market operations.
The vast bulk of the assets underlying these securities are residential
mortgages, with other assets, such as commercial property mortgages and car
loans, constituting only about 2% of the pools.
Kent noted that banks have responded to the regulatory actions by
Australian Prudential Regulation Authority (APRA) and the Australian Securities
and Investments Commission (ASIC) by increasing interest rates on investor and
interest-only mortgages. But interest rates on principal-and-interest loans to
owner-occupiers are little changed and remain at very low levels.
"Pulling this all together, the average interest rate paid on all
outstanding loans has increased since late last year, but only by about 10 basis
points," he said.
Another observation made by RBA is that despite many borrowers on
interest-only loan building up sizeable buffers in their offset mortgage
balances, their current loan-to-valuation ratios are larger than in the case of
principal-and-interest loans.
Kent said that non-performing housing loans have increased a little over
recent years but at around 0.75% as a share of all housing loans, they remain
low and below the levels reached following the global financial crisis.
But a drill-down into the data reveals that while the arrears rates "have
increased slightly over recent years, they have increased more noticeably in
regions exposed to the downturn in commodity prices and mining investment," Kent
said.
At the Q&A session, Kent said mortgage arrears would rise significantly if
the economy turns very weak but he wouldn't speculate on the level of interest
rate that could generate that sort of a problem.
He said the RBA is committed to taking a cautious approach when it
eventually raises interest rates.
"As we suggested, the board will be very attentive to pressures in the
economy coming out at a time when eventually rates start to rise," he said, and
quickly added, "that's not anytime soon."
--MNI Sydney Bureau; tel: +61 2-9716-5467; email: sophia.rodrigues@marketnews.com
[TOPICS: MMLRB$,M$A$$$,M$L$$$,MT$$$$]
To read the full story
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.