Credit to loosen a little: Pete Wargent

In May 2018, I noted that I didn't think we'd end up with a major housing crunch.

 

Part of my reasoning was that 'lenders gonna lend'.

 

In other words, just as we've used a knife and fork for more than 800 years, Australia's financial system has been deregulated for decades, and we still have four major banks, all of which need to lend money to make money.

 

I felt this would insulate the housing downturn, despite the heavy macroprudential changes.

 

What wasn't so clear at that time, at least to me, was the full impact that the Royal Commission would have on the appetite of lenders. 

 

In the event, a full seven rounds of public hearings was played out in front the media throng, and the final report wasn't delivered until last month.

 

Accordingly there have been some nervous operators over the past year or so, and there was a very noticeable impact on mortgage processing and practices. 

 

 

The RC final report being submitted only in February 2019, this is all very much fresh in the memory, so any loosening of the credit taps is likely to be gradual.

 

But still, with a smaller mortgage pie to be shared around - lending volumes are down by a fifth from a year earlier - and major banks having lost market share in recent years, I believe there will be some policy moves to win business and get mortgage book growth back into positive territory.

 

It's only March, bear in mind, the month after the final RC report, but today we saw the first interesting move of any note, from ANZ Bank:

 

 

90 per cent LVR investment mortgages with a 10-year interest-only term should generate a bit of welcome business for ANZ (not to mention profit, since rates and have tended to be higher on IO mortgages). 

And ANZ has generally been one of the more proactive lenders of late.

 

Some context is due.

 

Borrowers taking this option on a 10-year IO mortgage will see sundry borrowing capacity hampered, due to the way in which this mortgage debt is assessed.

 

And, indeed, most IO loans don't run for 10 years. 

 

But it's a nice cushion for borrowers seeking IO certainty, and moreover it's the first positive signal of competition returning for investor borrowers.