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Moody's lowers bank ratings, prompting home loan warning

Moody's lowers bank ratings, prompting home loan warning

On the back of the new government tax levy, credit agency Moody's have issued a credit rating downgrade.

Moody's stripped the big four banks - the Australia and New Zealand Banking Group (ANZ), Commonwealth Bank of Australia (ASB in New Zealand), National Australia Bank (BNZ in New Zealand), and Westpac Banking Corporation (Westpac) - of their Aa2 long-term rating and placed them on the next level down at Aa3, although it did not alter their short-term ratings. The rating outlooks of these banks have been revised to stable from negative, it said.

Australia's largest banks have been dealt a serious double blow.

Another of the global ratings agencies, S&P, downgraded nearly all of Australia's banks last month, but spared the big four.

Also, if there was a shift away from government support for the banks, as seen in the U.S. and Western Europe. The combination of soaring house prices and stagnant wage growth has pushed the ratio of household debt to disposable income to 189 percent - one of the highest levels in the world.




The Australian government has taken steps in recent months to cool the red-hot property market amid concerns that speculation in housing could ultimately hurt consumers, banks and the economy.

According to Bloomberg, more than 60 per cent of the loans made by Australian banks are for residential property, compared to less than 40 per cent in Canada, the U.S. and Britain. The banks have recently tightened lending standards under pressure from regulators.

Moody's said elevated risks within the household sector heighten the sensitivity of Australian banks' credit profiles to an adverse shock. Are they anxious about house prices?

The downgrades come at a time of declining wholesale interest rates in the New Zealand wholesale money market, which has seen the five year swap rate drop to 2.68 per cent from 3.07 per cent at the start or the year.

The committee report also said the legislation should also be amended to allow the treasurer to suspend the levy in cases where banks are in extreme financial hardship.


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