CBA chief executive Matt Comyn says the decline in house prices will spark a negative “wealth effect”, where consumers cut spending when their on-paper wealth falls.
Commonwealth Bank chief executive Matt Comyn says falling house prices will inflict further damage on consumer spending, and warns household budgets have only felt a fraction of the rise in mortgage repayments that were coming.
“Alongside the impact on consumption from rising rates, we also think that that wealth effect, or people effectively seeing asset prices go down, will also flow through into consumer confidence and reduced consumption,” Comyn said. Investors are focused on how banks are being affected by rising interest rates, which have sparked fears of bad debts, but rising rates are also expected to widen banks’ profit margins as lenders raise rates on loans more steeply than what they pay on deposits.
CBA shares closed 0.1 per cent lower at $101, having recovered from an earlier fall of about 1 per cent.
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