Deloitte report: a consumer-led revolution in mortgagesDOWNLOAD
3 March 2014: The $1.3 trillion Australian mortgage market is on the cusp of exciting change led by a digital and data revolution. In its annual report Deloitte asks a residential lending roundtable of industry leaders to consider current trends in home loans, and look to the driving forces of change over the next three years.
The current market outlook for 2014 is that mortgage settlement growth is back and competition will intensify. The report notes that as 2013 came to a close, annualised settlement growth of greater than 20% drove a record number of housing commitment applications across the market.
Deloitte banking partner James Hickey, and a primary author of the report said: “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.
“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.”
“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 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.
“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.
Deloitte Digital partner Katherine Milesi explained: “The greatest challenge of the times is not about the technology itself, it’s about how it is stitched together. There are 23 million Australians, and we have 32 million mobile devices, which will grow to 100 million in five years’ time. So digital is not just about laptop, it’s about mobile – smartphones, tablets and phablets – as well as social media, and how all of these can come together to assist consumers with simplicity and assisted self-serve.
“The challenge also is to bring the technology pieces of the puzzle together in a way that makes customers feel like they’re interacting with the same brand, and getting support across all touch points and through all channels.
“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.
Hickey said: “The other important factor that will influence mortgages over the foreseeable future is the market and policy-led initiative of the Financial Systems 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.’”
Mott said: “To be able to allocate greater levels of superannuation money to fixed income as an asset class and away from the dominance of equities would be a good thing for the banking sector and competition, as it would support a more vibrant securitisation market. Securitisation will be a significant topic for the Inquiry, as regional banks, non-banks and the larger banks all seek funding diversification.
“Competition will continue to ramp up as both new online lenders and non-financial services players seek to enter the mortgage market. While newly originated loans are still delivering a healthy 200bps of NIM for the majors, banks have had to deepen their discounts to customers and increase their commissions to brokers to compete for new flows in the market. And while some heat has come out of the deposit war, any equities market rally could put upwards pressure again on deposit rates for banks .
“As Australia leads the world to position for growth and the nation looks to the financial services sector to finance its future, the need for Australia’s $1.3 trillion mortgage market to have the agility to deliver earnings in a volatile market, is paramount.”
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