Table Of Contents
Overview 1
Catalyst 1
Summary 1
Executive Summary 2
Consumer outlook shapes mortgage demand 2
Consumer outlook has recovered 2
Consumer confidence in employment is an especially important factor for mortgage demand 2
Consumers do not expect interest rates or property prices to fall over the next 12 months 2
Choice of fixed or variable rate mortgages is driven by rate expectations and consumer confidence 2
Upgraders and refinancers have become a prime segment for mortgage lenders 3
Mortgagors looking to upgrade or refinance have distinct characteristics 3
Despite consensus about low forecasts, first-time buyers and investors may surprise the market 3
Different demographics have different mortgage attitudes 4
Housing affordability and undersupply are currently key factors for the mortgage market 4
Housing undersupply is chronic in some areas of Australia 4
Housing undersupply in certain areas can be ameliorated by upgraded transportation 4
Unused housing and unused land could provide a buffer against housing undersupply 4
Households have fewer people and dwellings have grown larger 5
House prices have increased faster than wages and housing costs claim a higher proportion of income 5
Government efforts to solve affordability issues have been criticized for not addressing the supply side 5
Younger demographics are now less likely to own or expect to own property 5
Realistic buyer expectations could help affordability 5
There is a limit to how high housing costs can go as a proportion of income 5
Price correction 6
Increase in renting and fewer homeowners 6
Product innovation 6
Provider brand attitudes are in flux 6
Brand images vary by bank 6
Mortgage satisfaction has improved over the last year 7
NAB is attempting to reverse its image 7
Credit unions are switching their proposition from service to price 7
CBA and Westpac are pursuing multibrand strategies 7]
Table of Contents 8
Table of figures 9
Table of tables 10
Consumer Outlook Shapes Mortgage Demand 11
Consumer outlook for property prices, interest rates, and the job market are central to mortgage demand 11
Consumer outlook has recovered 11
Consumer confidence in employment is an especially important factor for mortgage demand 13
Consumers do not expect interest rates or property prices to fall over the next 12 months 15
Choice of fixed or variable rate mortgages is driven by rate expectations and consumer confidence 16
Demand can be segmented in different ways 18
The majority of property and mortgage demand will come from consumers who already hold a mortgage 18
Upgraders have become a prime segment for mortgage lenders 19
Refinancers are also expected to make up a larger proportion of the mortgage market 19
Mortgagors looking to upgrade or refinance have distinct characteristics 21
Despite consensus about low forecasts, first-time buyers and investors may surprise the market 26
Different demographics have different mortgage attitudes 28
Housing Affordability and Undersupply are Currently Key Factors for the Mortgage Market 33
Undersupply and affordability have complex links 33
Housing undersupply is chronic in some areas of Australia 34
New construction has failed to meet the demand for new housing 34
Housing undersupply in certain areas can be ameliorated by upgraded transportation 36
Unused housing and unused land could provide a buffer against housing undersupply 36
Households have fewer people and dwellings have grown larger 37
Housing affordability has steadily declined over the last decade and is set to deteriorate further 38
House prices have increased faster than wages and housing costs claim a higher proportion of income 38
Government efforts to solve affordability issues have been criticized for not addressing the supply side 40
Younger demographics are now less likely to own or expect to own property 40
Realistic buyer expectations could help affordability 41
There is a limit to how high housing costs can go as a proportion of income 43
Price correction 43
Increase in renting and fewer homeowners 43
Product innovation 43
Provider Brand Attitudes are in Flux 45
Brand image and customer satisfaction are ongoing issues for providers 45
Brand images vary by bank 45
Mortgage satisfaction has improved over the last year 48
Several major brand realignments are currently taking place 49
NAB is attempting to reverse its image 50
Credit unions are switching their proposition from service to price 52
CBA and Westpac are pursuing multibrand strategies 52
Appendix 53
Data tables 53
Definitions 63
Balances outstanding 63
CAGR 63
Cash rate target 63
Gross advances 63
Lending commitments 63
Methodology 63
Further reading 63
Ask the analyst 64
Datamonitor consulting 64
Disclaimer 64
List of Tables
Table 1: Housing starts and forecasts, 2003-11f 53
Table 2: Mortgage attitudes by age group, June 2010 53
Table 3: Housing interest payments as a proportion of disposable income, March 2000-March 2010 54
Table 4: Consumer outlook, 2008-10 54
Table 5: Consumer outlook, 2008-10 55
Table 6: Consumer outlook, 2008-10 55
Table 7: Consumer outlook, 2009-10 55
Table 8: Consumer outlook, 2009-10 56
Table 9: Fixed rate proportion of owner-occupier lending commitments and rates, January 2000-May 2010 57
Table 10: Mortgage tenure expectations, 2008-10 58
Table 11: Mortgage tenure expectations, June 2010 58
Table 12: Mortgage tenure expectations and broker usage, June 2010 58
Table 13: Mortgage tenure expectations and mortgage attitudes, June 2010 59
Table 14: Mortgage tenure expectations and mortgage attitudes, June 2010 59
Table 15: First-home buyer frequency and intentions, 2009-10 59
Table 16: Investment property buyer frequency and intentions, 2009-10 60
Table 17: Mortgage intentions by age group, June 2010 60
Table 18: Channel preference by age group, June 2010 60
Table 19: Channel preference by age group, June 2010 61
Table 20: Mortgage stress by age group, June 2010 61
Table 21: Mortgage provider satisfaction, 2008-10 61
Table 22: Mortgage provider satisfaction, 2008-10 62
Table 23: Brand image of main financial institutions, June 2010 62
Table 24: Brand image of main financial institutions, June 2010 62
List of Figures
Figure 1: General economic outlook has improved since 2008 12
Figure 2: Personal financial outlook has improved since 2008 13
Figure 3: Employment concerns have increased since 2008 14
Figure 4: Consumers do not believe interest rates or property prices will fall between 2009-10 15
Figure 5: Consumers tend to fix their rates at interest rate peaks, January 2000-May 2010 17
Figure 6: Property supply and demand can be broken down into basic components 18
Figure 7: Around half of mortgagors expect to keep their current mortgage and provider for 10 years or more, June 2010 20
Figure 8: Fewer mortgagors in 2010 expect to keep their main mortgage for more than 10 years, compared to 2009 21
Figure 9: Mortgagors in 2010 expect to keep their main mortgage and provider for a shorter time, 2008-10 22
Figure 10: Current mortgagors are more likely to use a broker compared to non-mortgagors, June 2010 23
Figure 11: Expected tenure affects different attitudes, June 2010 24
Figure 12: Expected tenure affects different attitudes, June 2010 25
Figure 13: Intention to purchase a first property has risen, 2009-10 26
Figure 14: Intention to purchase an investment property has risen, 2009-10 27
Figure 15: Intention to purchase a first property has risen, 2009-10 29
Figure 16: Generation X is most likely to prefer applying for mortgages online, June 2010 30
Figure 17: Generation X is most likely to prefer using a broker, June 2010 31
Figure 18: Generation Y is most likely to experience mortgage stress, June 2010 32
Figure 19: Housing affordability and undersupply have complex links 33
Figure 20: Housing starts are predicted to falter in 2011 after a recovery in 2010 35
Figure 21: Households have fewer people and dwellings have grown larger 37
Figure 22: Housing interest payments as a proportion of total disposable income has risen over the last decade, March 2000- March 2010 39
Figure 23: Generation Y is much less likely to require a deposit to feel safe, 2010 42
Figure 24: Australian customers rate the safety of their main financial institution highly, June 2010 46
Figure 25: Each major institution has its own brand image strengths and weaknesses, June 2010 47
Figure 26: The proportion of very satisfied and very dissatisfied mortgagors has fallen, 2008-10 48
Figure 27: ANZ continues to have the most satisfied mortgage customers, 2008-10 49
Figure 28: NAB has the highest rating among MFI customers regarding pricing, June 2010 51