The Turbulence in International Credit Markets Has Led To Increased Funding Costs for Australian Lenders - Mortgages In Australia 2008

DUBLIN, Ireland--(BUSINESS WIRE)--Research and Markets (http://www.researchandmarkets.com/research/156c84/mortgages_in_austr) has announced the addition of the "Mortgages in Australia 2008" report to their offering.

Introduction

The Australian mortgage market is facing a number of internal and external challenges. Record low housing affordability is pressuring mortgagors, and the global credit crisis has increased funding costs for lenders. This report puts the current situation in its historical perspective, describes current trends in the market, and analyzes potential future developments.

Scope

Includes a comprehensive overview of the Australian residential mortgage market.

Draws upon a large consumer survey to gain insights into the current mindset of the Australian mortgagor.

Includes market overview, analysis of customers, product attributes, competitor breakdown and future developments.

Provides three scenario forecasts for lending commitments in Australia until 2012.

Report Highlights

The turbulence in international credit markets has led to increased funding costs for Australian lenders. This has caused several of the Australian banks to revise their estimates of profitability for the next year downwards, and to raise their rates.

A higher degree of leverage for mortgagors may be a cause for concern in the event of a market downturn. Rising interest rates combined with falling property prices would leave some mortgagors overcommitted, especially if the mortgage was taken out with the expectation of refinancing.

The internet has already altered the way that mortgages are researched, as it has become very common for prospective mortgagors to compare prices and features from different lenders online. Actually applying for a mortgage over the internet is as yet quite uncommon, as consumers often desire face-to-face contact for such important decisions.

Reasons to Purchase

Plan your future strategy with confidence using The scenario-based forecasts of Australian lending commitments until 2012.

Understand the challenges the mortgage industry is facing, as well as the opportunities.

In-depth analysis of how Australian providers approach different issues, allowing you to reassess your strategy.

Key Topics Covered:

Overview 1

Catalyst 1

Summary 1

Executive Summary 2

Market Context 2

Illiquid global credit markets and record low Australian housing affordability threaten the market 2

Customer Focus 3

Product Focus 5

Competitive Dynamics 6

CBA is the largest lender with outstanding loans of A$172 billion 7

ANZ currently is the major bank with the highest proportion of satisfied mortgagors 8

Future Focus 9

Lending commitments will reach an estimated A$349 billion by 2012 10

Market Context 14

The Australian mortgage market has grown strongly over the last two decades 14

Housing credit aggregates reached A$909 billion in 2007 14

Housing credit per adult Australian exceeded A$54,000 in 2007 15

Australian mortgagors have become more leveraged 16

Property investing has helped fuel the growth of housing credit aggregates 17

Lending commitments amounted to A$263 billion in 2007 19

The proportion of lending commitments attributable to investors has risen since 1993 21

Refinancing has become more common in the Australian mortgage market 22

First time buyers are continuing their tentative return to the market 23

Lending commitments for new construction have not kept up with lending for existing properties 24

The Australian mortgage market faces internal and external challenges 27

Property prices have grown strongly, especially in major cities 27

House price growth has been especially strong in Perth 29

Rising property prices have priced many Australians out of the market 30

Rising interest rates have exacerbated the already difficult housing situation 30

The cash rate target has risen 12 consecutive times since 2001 31

Industry observers widely believe the cash rate target will increase further in 2008 31

The threat of rising interest rates has revived interest in fixed rate loans 32

Adverse global credit conditions have recently impacted on the Australian mortgage market 33

The global credit crunch has affected banks and non-bank lenders alike 33

Increasing lender funding costs will lead to rising mortgage rates 34

Customer Focus 35

Record low affordability threatens Australian mortgagors 35

Many Australian mortgagors are under financial stress 35

Getting on the property ladder is considered an impossibility by an increasing number of people 36

Australian mortgagors often refinance to achieve the best rate 37

The average mortgage is now only held for four to seven years 37

Refinancing strategies can be risky in the face of adverse market conditions 38

Attitudes towards home ownership are changing 39

Traditionally home ownership has been an integral part of the "Australian Dream" 39

The younger generations attitudes differ from their elders 39

Product Focus 41

Mortgage products have evolved and become more diversified 41

Mortgages now offer more features and options 41

Low deposit products have become very common 41

Low documentation products cater to those who can not provide proof of income 42

Longer loan terms have been introduced but are not yet popular 43

New mortgage products have entered the market 44

Mortgage packages have entered the mainstream and are openly advertised 44

Private market shared equity mortgages were recently introduced 45

Reverse mortgages have become more common but are still a small niche product 46

Competitive Dynamics 48

Pricing has been subjected to considerable competitive pressure in Australia 48

Non-bank lenders challenged the banks in the 1990s 48

Foreign lenders have recently had success in the Australian market 50

Average loan margins have steadily shrunk as a result of competition 51

Banks have recently won back market share from non-bank lenders 53

Unfavorable global credit markets have disproportionately affected non-bank lenders 53

Borrowers have responded to uncertain market conditions by returning to brands perceived as safe 54

Channels to market are the focus of strategic shifts 56

The branch channel competes with the mortgage broker channel 56

The mortgage broker channel faces its own unique challenges 56

National legislation is expected to be introduced in 2008 56

Many brokers are looking to diversify their product range 56

CBA is still the largest Australian lender in a fragmented market 57

CBA is the largest lender with outstanding loans of A$172 billion 57

New entrants are threatening incumbents with rapid growth 60

The five largest banks hold around two thirds of outstanding mortgages 61

ANZ currently is the major bank with the highest proportion of satisfied mortgagors 62

Credit unions and building societies are squeezed by increasing competition 63

Specialist mortgage lenders are riding out the storm 64

The proportion of outstanding mortgages attributable to securitization vehicles has recently fallen 65

Future Focus 66

Mortgage products will continue to evolve 66

There will be demand for products offering better affordability 66

Product convenience will increase 66

In the long term the internet has the potential to revolutionize the mortgage market 67

Customized mortgages are a way to serve niche customers 69

Government initiatives may change the playing field 69

The new Australian government has promised to tackle housing affordability 69

A recent government initiative will introduce tax-exempt savings vehicles for prospective first home buyers 69

The First Home Saver Account scheme has attracted some criticism 70

Lending commitments will reach an estimated A$349 billion by 2012 under the neutral view 71

Our forecasting methodology of lending commitments consider both macroeconomic and soft factors 71

APPENDIX 74

Supplementary data 74

Definitions 101

Balances outstanding 101

CAGR 101

Cash rate target 101

Gross advances 102

Lending commitments 102

Mortgage manager 102

Mortgage offset account 102

Non-conforming 102

Tranches 102

Methodology 102

Further reading 102

Ask the analyst 103

Our consulting 103

Disclaimer 103

List of Tables

List of Figures

For more information visit http://www.researchandmarkets.com/research/156c84/mortgages_in_austr

Source: Datamonitor