Commonwealth Bank chief executive Matt Comyn said lower house prices would be good news for housing affordability and the stability of the financial system as the bank recorded weaker growth in its extensive portfolio of mortgage loans.
After interest rates were officially hiked last week, Comyn said on Thursday the economy and mortgage customers could absorb higher borrowing costs as the CBA posted flat quarterly profits of $2.4 billion. .
Comyn, which heads Australia’s largest mortgage lender, reaffirmed the CBA’s previous view from February that prices were likely to “moderate” this year before falling 5-10% in 2023, and said that he believed the price declines would be in the “upper band”. of this forecast.
After house prices grew rapidly in 2021, fueled by ultra-low interest rates, Comyn said a drop of this magnitude would be beneficial.
“I think all things being equal, it’s…a good thing for housing affordability and stability. There’s been a lot of rising house prices, so a moderation of that, I think that’s a positive,” Comyn told the Sydney Morning Herald and Age.
Outlining a broadly positive view of the economy, Comyn said the ABC expected official interest rates to rise to 1.35% by the end of this year, before settling at 1.6% next year, which is significantly lower than money market bets on a spike in cash rates above. 3 percent. Comyn said the CBA’s planned rate hikes would be enough to bring inflation under control without derailing the recovery.
“We expect, as we have seen in previous cycles, that the Australian economy and consumers will be quite sensitive and reactive to changes in the cash rate, so we believe that the inflation rate will be slowed by these increases in cash rate, which will reduce demand in the national economy,” he said.
Comyn also pointed to stiff competition in mortgage lending, with CBA profit margins continuing to shrink as competitors offer cheap interest rates. He said major rivals were taking on new loans at interest rates that would not meet the CBA’s profitability hurdles.