Out-of-cycle mortgage hikes biting the economy

Domestically, the rise in mortgage rates is starting to bite sections of the economy. Lower auction clearance rates have been observed and the first decline in Sydney house prices were posted in April.

We have previously written about the headwinds caused by out-of-cycle Australian Banks mortgage hikes. These moves place pressure on household disposable incomes at a time when wage growth is at the lowest ever recorded level.

We believe the financial effect of the December 2016 mortgage hike is currently impacting the market. And we note that the March mortgage hikes are only now hitting April mortgage statements for the first time.

Given the large debt loads in the system and high-interest rate sensitivity, the domestic data is likely to decay into the second-half of 2017. We expect that banks will continue to lift mortgage rates throughout 2017 as the Fed continues to lift US interest rates.

From the JCB monthly here:  (VIEW LINK)