Source : the age
Commonwealth Bank chief executive Matt Comyn says first home buyers are likely to start coming into the property market in greater numbers once they expect interest rates to fall, after it reported a 15 per cent drop in mortgage lending since the budget.
CBA on Wednesday became the latest big lender to report a decline in its new lending due to the slump in the property market, as it also notched up $11 billion in cash profits for the year to June.
The banking giant said mortgage applications had dropped 15 per cent since the May budget’s clampdown on property investor tax breaks, and the sharpest fall had been in investor loans.
Even so, Comyn also said applications had stabilised this month, and the bank still expected growth in housing credit over the year ahead.
The government says its clampdown on property investor tax breaks is aimed at helping first home buyers afford a home, and Comyn said he expected a pickup in demand once there was “anticipation of rate cuts.”
When asked if the government’s changes had helped first home buyers, Comyn said house prices had peaked in March, and “fallen in the four months since then, I think about 2.5 per cent.“
“Now, obviously, there’s a range of different, forecasts, but you would imagine that, when rates look like they might change, we’ll see an increase,” Comyn said.
The Reserve Bank has raised the cash rate three times this year, taking it to 4.35 per cent, and economists are split over whether interest rates have now peaked. CBA economists believe the RBA will keep rates unchanged for the rest of this year, and are forecasting two rate cuts next year.
Comyn’s remarks on housing came after the bank notched up $11 billion in cash profit fuelled by growth across its vast loan and deposit portfolios, as it also warned economic growth was slowing amid higher interest rates and inflation.
Cash net profit after tax rose 7 per cent in the year to June, as its operating income grew by 6 per cent, helped by growth in CBA’s key markets of home loans, business loans, consumer lending and household and business deposits.
Despite strong growth in the year to June, however, CBA also said new applications for mortgages had fallen 15 per cent since the May budget, as the housing market slows due to higher interest rates and a tightening in tax concessions for property investors. The bank also said costs from soured loans had increased due to cost of living pressures and increased economic uncertainty.
Chief executive Matt Comyn said the economy had been resilient, helped by low unemployment and solid investment, though economic growth was feeling the effects of higher interest rates and inflation.
“Growth is slowing, with higher interest rates and inflation placing
uneven pressure on household incomes and economic activity,” he said.
“Housing activity has softened from a high base.”
The results also provided more evidence that mortgage applications have slowed sharply across the banking industry since the May budget, which included moves to clamp down on borrowing by property investors.
CBA said its home loan applications had fallen 15 per cent since the May budget – though this trend appeared to have stabilised recently.
The 15 per cent drop compares with Westpac this week saying its home loan applications were down 20 per cent since the budget, while late last month National Australia Bank said its Australian home loan applications were down 15 per cent in the June quarter compared with the March quarter.
“Housing activity has softened from a high base. Application volumes appear to have stabilised in recent weeks. Businesses continue to manage higher input costs and supply uncertainty,” Comyn said.
Analysts had expected full-year cash profits of about $10.85 billion. CBA raised its final dividend to $2.70, up from $2.60 last year.
CBA’s numbers are seen as a bellwether for the Australian economy, and the banking giant’s results showed its expenses for impaired loans had increased by 47 per cent in the June half compared with the March half, to $788 million.
The bank said the increase reflected growth in its portfolio as well as cost of living pressures alongside increased geopolitical risk and economic uncertainty.
The bank’s net interest margin, which compares bank funding costs with the price of loans, edged 2 basis points higher over the year to 2.05 per cent.
Operating expenses rose 6 per cent over the year due to factors including inflation and higher investment in technology.
CBA, Australia’s largest bank, said that during the year to June it had grown in line with or faster than the industry average in its five core markets: home loans, business loans, consumer finance products such as credit cards, household deposits and business deposits. “It is the first time CBA has achieved this and the first time any major Australian bank has done so in the past 15 years,” CBA said.
Return on equity, a key measure of profitability, rose by 0.5 percentage points to 14 per cent over the year.
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Clancy Yeates is deputy business editor. He has covered banking and financial services, and was previously national business correspondent in the Canberra bureau.Connect via X or email.
