Deloitte has released its annual Australian Mortgage Report 2013 today and the news is that it expects an intensification of competition in the year ahead:
Australia’s mortgage industry shifts up a competitive gear
26 November 2012: The heads of mortgages and home lending CEOs and CFOs in this year’s Deloitte Australian Mortgage Report 2013, expect 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.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.
“To this end we consider that lenders in 2013 will focus on leveraging the opportunities in existing portfolios or back books,” said Deloitte Financial Services Partner James Hickey. “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,” Hickey explained.
“Differentiation in this market will be defined by how the lenders balance their market share and earnings growth. For most lenders the mortgage portfolio is the largest engine in their business and creates the most enduring customer relationship for the bank,” he said.
“So driving efficiencies across end-to-end mortgage operations, and ramping up channel innovation through digital delivery to meet growing customer needs, will be increasingly important in 2013 if lenders are to maximise the potential of their mortgage portfolios and deliver the value to the broader organisation.”
This argument is analogous to the RBA’s recent statements about rising productivity owing to pressure on the tradeable sectors of the economy from the high dollar. In this case it is pressure exerted from slack demand and the report is forecasting a simple continuation of the current 5% growth rate, at best.
On the whole I agree with these prognostications and will simply add that if competition does intensify then regulators need to be on the ball as credit quality will also be under pressure.
Credit where it’s due, last year’s report proved to be pretty good, forecasting a frustrated rebound. The wider media has, of course, misreported the document as some harbinger of a new boom when it quite the opposite.
Australian Mortgage EXTRACT (1)
