Macquarie mortgage business to 'normalise'

Macquarie Group expects its runaway mortgage business to "normalise" over the next couple of years, as its growth rate moderates and it starts to produce a higher return on equity.

Speaking at an operational briefing yesterday, Macquarie's group head of banking and financial services, Greg Ward, said the mortgage market was very competitive.

Ward said: "We are looking to originate high quality mortgages at an appropriate return on equity.

"Our growth will depend on margins and the way credit is being assessed. We expect [competitive pressure] will see us moderate our rate of growth. You have seen that in recent months."

Macquarie's mortgage book grew by 41.5 per cent over the 12 months to December but in the month of December the growth rate dropped back to an annualised rate of around 20 per cent.

In December the Australian Prudential Regulation Authority wrote to authorised deposit-taking institutions, warning that it would increase its supervision of mortgage lending. It said its focus would be on lenders with high growth rates, high loan-to-valuation ratio lending, investor lending and loan serviceability.

Ward said Macquarie was too small to be of major concern to the regulator. "I don't think we are the target of APRA's announcement," he said.

Macquarie's lending to property investors during the December was 44 per cent of its total mortgage lending - a little above the industry average of 41 per cent.

Twelve per cent of its loans during the quarter had LVRs of 80 per cent to 90 per cent - in line with the industry average. Seven per cent of its loans had LVRs of more than 90 per cent, compared with the industry average of 11 per cent.

"As we have grown we have been careful with credit standards," Ward said.