When looking forward to 2017,
Mortgage Choice CEO John Flavell predicted a sideways movement in the property market while the
Australian Prudential Regulation Authority (APRA) worried about “frogs in pots”.
At a media luncheon yesterday, Flavell talked about APRA’s focus for the next twelve months. He said that
Wayne Byres, the association’s chairman, had stressed concern about the decrease in ROEs for lenders that had occurred over the past ten years.
“What he said was ‘I’m worried about frogs in pots’. It was an interesting quote. I typically don’t give those things much concern but he does.
“What he was saying is that in that environment where people are trying to claw back some return on equity, then they start taking incremental risks. In isolation those risks do not seem so significant but cumulatively when you stack them up, this can create some issues.”
Flavell also talked about his expectations from a property perspective over the next twelve months.
“We don’t expect the market to run away, we don’t expect it to go backwards, we expect it to go sideways,” he said.
While there were going to be some adjustments next year, these would be in micro pockets such as in inner city apartments, with the overall trend being a sideways movement.
“It’s interesting that we’ve just had the first negative forecast for economic growth since early 2011 so let’s see what sort of reaction we get out of the
RBA on that one.”
We have already reached the bottom of the market, Flavell said, with central banks across the globe, including the RBA, saying that the easing side is over and done with.
“The ripples in the pond start with fixed rates – and we’ve already seen the cost fixed rates go up – and then that puts pressure on the overall funding costs. We’re starting to see some variable rates for some lenders already going up.”
Related stories:
Gap in home loan rates continues to widen
Property investment back on the upswing
Are borrowers shunning fixed rate loans?
