Mortgages 2020: Looking Ahead

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Mortgages 2020: Looking Ahead

17 February 2020:  Australia’s leading lenders and mortgage brokers predict a modest recovery in the nation’s overall lending growth in 2020, as they see the green shoots of the last six months of 2019 lending growth continuing into 2020.

Deloitte financial services partner James Hickey said: “New mortgage financing or settlements totalled $316 billion over the 12 months to December 2019. This was an average of $26.4 billion per calendar month, which, while still a large volume of activity nationally, represents a notable reduction compared with 2018.

“This decline in settlements led to a slowing in the overall outstanding lending rate.  

“The total outstanding stock of mortgages in calendar year 2019 grew to $1.82 trillion overall, which was an annualised increase of only 3.7%to 30 June 2019. This was the lowest rate of mortgage lending growth in Australia in the past decade.”

Hickey set this context at the 2020 Deloitte Australian Mortgage Report roundtable, where representatives from the nation’s biggest lenders and broker groups, along with Deloitte partners, discussed how the industry is evolving now and into the future.

Mortgage lending

Source: ABS, RBA, Deloitte Actuaries & Consultants

Deloitte Financial Services Partner Heather Baister said: “Although the Deloitte roundtable group predicts a relatively modest recovery in 2020 in terms of settlement volumes overall, the competitiveness between lenders will mean outcomes at a lender level is likely to vary noticeably.”

NAB’s General Manager, Home Lending Paul Riley agreed: “If we look at forecasts at a total systems and market level, that is settlements net of repayments and refinancing, most are forecasting total growth in outstanding mortgage volumes between 2% to 3%. However, the composition by customer segment, channel and by individual lender within that very macro number is likely to be quite different.” 

Riley added: “For the market to sustainably grow, we need to be building more houses and customers will need more income and confidence.’”    

Loan Market chair Sam White also called out the shortage of houses saying: “The lack of properties for sale was also one of the biggest features in 2019. Pre-approval numbers were massive. Customers were ready to buy but they simply could not find the property, as supply was not coming to market.”

Glenn Gibson ING said of his bank’s growth: “I believe the market is there for the right entity, with the right processes, with the right attitude.’ 

And Neobank Athena’s founder Nathan Walsh said: “As a specialised digital lender, we are seeing a shift in channel preference from intermediary to digital channels. Athena has written more than a billion dollars of home loans over our first 12 months since launch.”

In this year’s report Australian mortgage roundtable attendees also debated the customer segments with the best prospects for growth in settlements in 2020, as well as funding and pricing issues, regulatory focus areas, distribution requirements and innovation.

Customer segments

Daniel Carde, Head of Third Party Distribution at Resimac pointed out: “The only way you’ll see sustained growth in the first home buyer’s market is through product innovation focused on affordability.”

And ANZ’s General Manager Home Loans, John Campbell, agreed: “Affordability in that first home buyer segment is a real challenge. Banks are doing our bit to support first home buyers, so it is not a question of desire or ability to make credit available to that segment, but more about how to get them into the market responsibly.” 

“If productivity is not going to boost wages growth, it’s really hard to see first home buyers make headway against others in the market,” Michael Thomas, Deloitte Access Economics financial services lead, said.  “Where the Australian economy heads over the next year is even more dependent on the pace of housing construction than it usually is.

“Housing construction is headed down rapidly, at the same time that house prices are headed up rapidly. Those seesawing conditions – prices up, volumes down – suggests housing construction has rather further to fall. However, Australia’s population growth is too strong for falls to be sustained much beyond 2020, which is likely to be the low point.”

Open Banking

Commenting on the impact and benefits of open banking for customers, the Deloitte Mortgage Report roundtable participants selected their top two choices from five potential outcomes.

  1. 30% believe that open data will increase opportunities for fintechs to leverage data to offer tailored customer solutions.
  2. 25% believe greater ownership of data by customers will shift power into the hands of the customer.
  3. 20% believe that opening up data ownership and transfer will mean greater price competition.
  4. And another 20% believe that customers will remain concerned about data and privacy. 

Deloitte’s James Hickey said: “Interestingly, only 5% of the participants believe that there will be customer inertia, which means that this representative group of Australia’s lenders believe that giving customers more information, a level playing field, and allowing some innovative fintechs and established lenders to supply innovative offerings will benefit consumers in 2020.”

For more an in-depth look at the Report and detail from the roundtable see the Mortgage Report here. See more media releases and research at www.deloitte.com.au

References

1. 12 months to 30 June 2019

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