The Reserve Bank of Australia has released its financial aggregate data. Over the 12 months to May 2017, total credit provided to the private sector increased by 5.0%.
However, for the first time since 2011, the annual growth in dwelling loan approvals turned negative. This has also coincided with a slowdown in loan size growth.
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We’re likely to see softer housing credit growth over the next 6 to 18 months.
The major banks have responded to the lower housing loan growth by announcing mortgage re-pricing starting with investor & interest only loans.
We believe the net-net impact on bank earnings will result in flat EPS growth over the next 12 – 24 months with the unknown risk being the potential pick-up in bad-debt provisioning.
