Banks will cut back on home loans

By , 9 April 2010

Growth in demand for business credit will force the major banks to reduce their high exposure to the residential mortgage market, a new report has found.

The JPMorgan/ Fujitsu Mortgage Industry Report has revealed that CBA is the most exposed, with 65% of its loan book locked into home loans. Westpac follows closely on 62%, then ANZ (56%) and NAB (51%).

“Business will want to borrow again and that means banks will have some tough decisions where they allocate their funding going forward – not only for the best return, but also where the best growth profile is,” said JPMorgan analyst Scott Manning.

First home buyers will bear the brunt of the changes, with banks moving to tighten LVR requirements as a first step to reducing their residential loan books. Less than 10% of new loans now written are over 95% LVR. This compares to 30% at 95+ just a year ago.