Major Banks to cut their mortgage lending: JP Morgan

Major Banks to cut their mortgage lending: JP MorganJPMorgan Chase said today in its report that four major banks, including the Commonwealth Bank of Australia, could reduce lending in the residential property sector.

The banks are considering this move to reduce their levels of exposure to the increasingly lower profit sector.

JP Morgan said in its mortgage industry report, released today, that the speed at which residential mortgages were sold during the past year and a half cannot be sustained.

While industry analysts said that the slowdown in mortgage lending would result in a price correction. Commonwealth Bank of Australia, Westpac Banking Corp.,

Australia & New Zealand Banking Group Ltd. and National Australia Bank Ltd. are the top four banks in Australia.

According to the JP Morgan report, these banks increased their share of local mortgages to 76% from 65% before the tightening of global credit.

"Businesses will want to borrow again and that means banks will have some tough decisions on where they allocate their funding going forward - not only for the best return, but also where the best growth profile," said JP Morgan. Currently, Commonwealth Bank of Australia Ltd. and Westpac Banking Corporation has 65% and 62% of its lending in the mortgage sector respectively.

National Australia Bank Ltd and ANZ Banking Group Ltd each have more than 50% of their lending allocated to home loans.