By Rob Starr, Content Manager, Big4.com
With borrowers continuing to seek the lowest price, and settlement growth expected to reach 5% at most, representatives from Australia’s residential lending sector are gearing up to meet the increasingly competitive environment in 2013 head on. In fact,the Deloitte Australian Mortgage Report 2013, expects competition in the $1.3 trillion Australian mortgage market to remain tight. In a wide ranging roundtable discussion participants anticipated a tough 12 months ahead.
Deloitte Financial Services Partner James Hickey comments:
“”To this end we consider that lenders in 2013 will focus on leveraging the opportunities in existing portfolios or back books,” he said. “This involves retaining valuable customers by ensuring a better customer experience at the front end. It also means using data better to identify and leverage customer cross sell and upgrade opportunities, as well as protecting interest margins on existing portfolios. “Leveraging existing portfolios – the back book – is the least expensive and most successful approach to maintaining residential mortgage market share and earnings. More so than competing aggressively for new customers.”
The sentiment of the roundtable was that despite the combination of interest rate reductions and stronger personal balance sheets, the current flat property prices combined with what was perceived as real systemic issues around consumer confidence, would be likely to keep borrowers sitting on the fence in 2013. However given that Australia suffers an endemic shortage of housing stock, even in a slower market it is expected that property prices will remain ‘there or thereabouts’ if not achieve a modest level of growth.
Hickey said that while it is unlikely that major lenders will increase their risk profile in 2013, there is opportunity for the smaller banks and non-bank lenders to leverage their risk appetite for ‘near prime’ borrowers.