Daily Commentary BY THE CURVE TEAM –

Daily Insights – RBA Extend QE

8th of September, 2021

RBA Decision

  • Will go ahead with tapering QE purchases to $4 billion a week down from $5 billion.
  • The have extended this rate of purchases out to February. Prior to yesterday QE was only confirmed until November.
  • Extending out to February ‘reflects the delay in the economic recovery and the increased uncertainty associated with the Delta outbreak’.
  • The economy is expected to recover slower than the start of this year, but ‘is expected to be back around its pre-Delta path in the second half of next year.’

Risky Lending Increasing

  • Mortgages with debt to income ratios over 6 times has increased 5.8 percentage points to 21.9% compared to last year.
  • On the other hand, the proportion of investor loans and interest only loans, regarded as more risky, were down on last year.

TFF Spurs Fixed Mortgage lending

  • According to Macquarie Securities, ‘The flow of new mortgage business to fixed rates increased from 10 to 20 per cent before May 2020 to around 50 per cent currently.’ (Quote from Banking Day)
  • As a result of the cheap TFF funding, the major banks will improve their net interest margin and revenues.
  • The intention to increase business lending has not played out as the RBA desired, up only 0.6% for the year.

Josh Stewart

Associate - Money Markets