Competition to intensify as mortgage settlement growth returns: Deloitte
The 2014 outlook for Australia's $1.3 trillion mortgage market is positive, according to the latest mortgage from Deloitte. The research firm, which surveyed a roundtable of residential lending industry leaders to consider the driving factors of change in the market, is predicting a "consumer-driven revolution" in mortgages.
Deloitte's report notes that at the end of 2013, a record number of housing commitment applications across the market was driven by annualised settlement growth of about 20%. Deloitte banking partner James Hickey was one of the report's primary authors. "Settlements across Australia on a monthly basis in 2013 reached more than $28 billion. That is the highest single monthly settlement rate on record, and a clear jump since the onset of the GFC, when they struggled to reach $20 billion," said Hickey.
"Confidence among borrowers is high. Investors have made a comeback and funding pressures are easing, promising a vibrant and competitive mortgage market this year and through to 2017."
But Hickey also noted that the market's performance wasn't due to the new buyers.
"However, most of the growth in settlement volumes through 2013 was due to existing owner-occupiers upgrading and investors returning rather than first home buyers entering," Hickey said.
The report also pointed to changing technology as a key factor that will shape the mortgage market over the next three years.
"The consensus from the Deloitte Mortgage Report roundtable was that digital and data will be the main game for mortgages over the next three years. For consumers, lenders and brokers, the digital and data revolution is producing significant change in how they are accessing and delivering the mortgage of the future," said Hickey.
"Much of this change will be consumer-led and driven by the need for both simplicity and advice from customers as to how best to manage their finances.
"The organisational winners will be those that can make the best scientific interpretation of the masses of 'big data' that financial institutions and others continue to accumulate and use this to facilitate successful proactive and valuable interactions for the consumer. Digital will be a critical enabler of that," Hickey said.
According to Deloitte Digital partner Katherine Milesi, face the challenge of presenting a coherent brand and service to customers who use a variety of digital devices.
"Customers want their banks to make life easier for them by using the unique data they have, to help them better manage their money. A simple example is being able to save an incomplete online application form and then call a sales assistant who can expedite completion. Being able to switch from one channel to another, without losing data or context, is exactly what omni-channel banking will deliver," Milesi explained.
Milesi also noted that the results of the government's upcoming Financial Systems Inquiry will influence activity in the mortgage market.
Of the inquiry, Deloitte Banking partner Graham Mott said, "The two largest engines in Australian financial services are mortgage lending ($1.3 trillion) and superannuation ($1.5 trillion). The inquiry needs to explore how these two significant systems can better interact at a macro (systems-wide) and a micro (household) level.
"There is a really exciting opportunity for the Inquiry to assist financial services be more integrated. To paraphrase Yellow Brick Road CEO Matt Lawler at the Deloitte roundtable: 'There is no longer one great Australian dream, there are two dreams running in parallel - to own your own home and to retire comfortably.'"
jrichardson@propertyobserver.com.au