We doubt that the phasing-out of caps on interest-only loans will provide much support to the housing market as there’s still a large imbalance between supply and demand. And the government won’t provide much support either as it has pledged to tighten fiscal policy further in the coming financial year. Indeed, RBA Governor Lowe’s moral suasion to encourage banks to lend underlines that the Bank is becoming less optimistic about the outlook for the economy and won’t hike interest rates anytime soon.
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