Low interest rates prompts 20% rise in mortgage settlements: Deloitte
Mortgage settlement activity increased by 20% last year as home owners took advantage of low interest rates to refinance their loans and upgrade their properties.
Key players in the home lending industry who participated in the Deloitte Australian Mortgage Report for 2015, which made that finding, unanimously expected refinancing and upgrading activity to continue be the primary driver of the market over the next three years.
The panellists forecast loan settlements would increase by a further 6 to 10% in 2015. Deloitte financial services lead Kevin Nixon said the record $33.2 billion of home finance commitments in December 2014 would boost the industry’s confidence in the prediction.
Despite the strong increase in settlements, the fact that many new loans refinanced existing mortgages meant overall credit growth was more constrained at around 7%.
“Credit growth over recent years has been lower than historical levels,” said Macquarie Bank head of intermediary banking Frank Ganis, who participated on the report’s panel. “Lending growth has been in refinances, with new lending at lower levels of around 3 to 4%. The market has also seen an increase in demand by investors.”
Local investors would be the second biggest borrowers in 2015, the panellists believed, although they commented that first home buyers who bought for investment could be concealed within that category.
“It is a worry as there is a hidden amount of first home investors that don’t get captured as first home buyers when you look at the official statistics,” ANZ’s Bill Armour said in the panel discussion. “The risk is that they classify anyone who has said they’re an investor as a non-first home buyer and as such are somewhat demonised as driving house prices up, but actually they are just savvy young people who have figured out a way to enter the market.”
The research also revealed that buyers were typically better informed about their mortgage options than they had been in the past.
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While borrowers were still most concerned with interest rates when they were choosing a mortgage, product features such as repayment flexibility and switching, online access to accounts and applications, and information and customer service were also important.
“[Lenders] don’t have to be the cheapest but [they] do have to be competitive and be seen to go the extra mile for the consumer,” said Deloitte financial services partner James Hickey, who lead the research.
Mortgage brokers were expected to increase in importance, although panel participants thought the role of brokers would change as technology evolved.
“As direct online applications start to emerge you will see some customers use that channel, which is good for choice,” said panellist, ME Bank’s Angela Middleton. “But there will always be an important role for brokers to have a face to face with customers, particularly customers who wish to better understand the product and get more information about what is available and what’s best for them.”
Panellists commented that few people felt comfortable enough with mortgage borrowing that they were prepared to go through the entire process online without assistance.