On Tuesday, Macquarie enacted a wide range of interest rate cuts, including:

  • Basic Fixed Investment 1 Year IO: 55 basis point cut to 2.89% p.a. (3.30% p.a. comparison rate*)
  • Basic Fixed Investment 2 Years IO: 55 basis point cut to 2.89% p.a. (3.26% p.a. comparison rate*)

These rates are for borrowers with a maximum LVR of 80%.

A number of other loan types were cut by between 10 and 55 basis points, including investment loans with offset accounts attached.

"Now more than ever people are looking for certainty around their budgeting and expenses, especially when it comes to home loans," a Macquarie spokesperson said.

Yesterday, the prudential regulator (APRA) released details into the value and number of home loans deferred in Australia as of July.

In a breakdown of risk profiles as a proportion of total loan deferrals, more than one in five of Macquarie's interest-only loans were deferred, tied first with Westpac and Bendigo Bank.

However, Macquarie did have the lowest number of 90%+ LVR loans in deferral out of the 20 largest banks, at just 3% of loans deferred.

Westpac's credit strategy team said there were "few surprises" in the APRA data.

"Key banks either reported or provided 3Q updates in August that reflected the July data and that will miss any further Victorian downside. August and September will prove more interesting," they said.

In total, about one in ten of Macquarie's loans were deferred, which is in-line with the wider market.

Is there a cliff coming?

A large portion of loans in Australia are funded by residential mortgage-backed securities (RMBS), which are explained in further detail here.

The amount of loans deferred can impact wholesale funding as investors adjust their appetite for risk.

Yesterday, credit ratings agency Moody's said it expects 'delinquencies' to rise in the coming months - that is loan pools that are in arrears by more than 30 days.

"Australian RMBS delinquency rates will increase for the remainder of 2020 because of the ongoing economic fallout from the coronavirus outbreak," the Moody's report said.

"Government relief measures, monetary policy easing and lender loan payment deferrals also supported borrowers over the June quarter, which contributed to lower prime RMBS delinquencies."

However, Moody's did point to a potential cliff should borrowers not start to repay their loans once deferrals end.

"As government and lender support measures expire in coming months, we expect delinquency rates to increase," its report said.

"Some borrowers on loan payment deferrals will not be able to resume full loan payments once deferral periods end.

"Deferred loans do not count as delinquent, but will do so if borrowers do not resume repayments at the end of deferral periods."

Non-banks have fewer loans in deferral

Yesterday, credit rating agency Standard & Poor's (S&P) released data into where most of the COVID-19 relief is coming from in the mortgage securities space.

In the 'prime' RMBS sector in July, it was revealed that, on average, 7.1% of major banks' securities had some form of deferral or relief in the underlying pool of mortgages.

This was as opposed to non-banks, which had 6.2% of theirs receiving some form of relief, while regional banks had 10.4% on average, representing an uptick from 8.3% in April. 

By state, Western Australia had the highest rate of delinquencies at 2.61%, followed by the Northern Territory at 2.59%.

Low-doc loans had an uptick in arrears to 6.52%, while 90-day-plus delinquencies rose to 4.38% - APRA data revealed 17% of all small business loans were deferred in July, amounting to $55 billion.

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