As interest rates climb, analysts predict the big banks will face slower growth in their lucrative mortgage portfolios | clancyyeates
, analysts predict slower new lending would ultimately cause softer housing credit growth for the banks, contributing to a more subdued backdrop for the lenders’ profits.
“A greater proportion of their disposable income is being absorbed by home loan repayments,” Bailey said. “I think it’s reasonable to say things are off their highs.” The signs new lending is off its highs come as financial markets expect the Reserve Bank of Australia to raise the cash rate from 1.35 per cent to 1.85 per cent this Tuesday, in an attempt to force down inflation.
“If we are heading into an environment where credit growth is going to be slow for a long period of time, it does have a substantial impact on the earnings outlook and the valuation of banks,” said German, who has more bearish estimates on credit growth than many other analysts.
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