Banks will hold repayments steady if customers are ahead on repayments, raising questions on the ‘transmission mechanism’ as customers’ budgets don’t change.
will almost certainly be passed through to mortgage holders which would mean repayments on a $500,000 debt increasing by $133 a month – as banks work to restore net interest margins squeezed when rates hit rock bottom.
But even as banks push standard variable rates higher, this does not mean all customers have to lift their monthly repayments, allowing many households to maintain their budgets - and raising questions about how quickly the so-called “transmission mechanism” to tame inflation will take effect. With less time to have repaid debt and the potential for negative equity as house prices fall, APRA boss Wayne Byres, in a speech toEvidence of rising arrears
“Equifax is observing stress for first home buyers is now at twice that of non-first home buyers. Higher LVRs [loan to value ratios] and levels of delinquency for this segment is a concern if this trend continues.”Citigroup analyst Brendan Sproules said an excess of balance sheet funding means major banks have not had to chase higher rates in the term deposits market, helping to expand spreads, which is positive for bank net interest margins in the near-term.