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Mortgages in Australia 2006 and Beyond


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Mortgages in Australia 2006 and Beyond

Description:    The Australian mortgage lending environment was very different in 2005 to that of previous years,
                primarily because property prices growth has slowed since 2003. This report looks at the causes
                and consequences of the slow-down and what is expected in the future. It also discusses the
                growing importance and popularity of niche mortgage products in the market.

                Scope of this title:
                - This report considers the growth of the market, analyzing growth patterns over the last five years
                - This report discusses the performance of various market sectors such as low-documentation, non-
                conforming, investment and reverse mortgages
                - This report analyses strategies employed by the most successful and innovative providers in the
                Australian market
                - This report forecasts the markets performance to 2010

                Highlights of this title:
                Favorable macroeconomic conditions have been the primary driver of the mortgage market in
                recent years as these conditions influence both consumers ability and willingness to borrow. The
                growth of the market is a reflection of sustained low interest rates, low unemployment levels and
                strong gross domestic product growth.

                The Australian financial services market has opened up significantly in recent years. However, it
                remains one the most heavily consolidated markets in the Asia-Pacific region with the big five
                expanding their mortgage market share to 83.8% of total lending. This displays the strengthening
                grasp of domestic banks even with international pressures.

                While property prices are stabilizing and even falling, property in metropolitan areas such as
                Sydney, remains too expensive for consumers entering the property market for the first time.
                Consequently, many providers are developing products specifically for this type of borrower.

                Reasons to order your copy:
                - Obtain forecasts of lending commitments for the next five years
                - Gain insight into successful strategies employed by mortgage providers
                - Learn about the increasing prevalence of niche mortgage markets such as reverse mortgages, low
                -documentation and non-conforming

                Chapter 1
                Scope 10
                Who is the target reader? 10
                How to use this report 10

                Chapter 2
                Market overview
                Key findings 12
                Market Growth 13
                The Australian mortgage market in terms of housing credit aggregates 13
                The Australian mortgage market in terms of lending commitments 18
                Market drivers 23
                The mortgage market continues to be supported by favourable conditions 23
                Conditions are favourable for first home buyers 27
                The Vendor Transfer Tax lives a short life 32
                The increasing trend of securitization 32
Chapter 3
Competitive dynamics
Key findings 36
Market shares 37
The mortgage market continues to be highly competitive 37
The top ten bank players, 2005 38
The performance of building societies and credit unions 46
The performance of specialist mortgage providers 48
The performance of banks, 2001-2005 49
The burgeoning growth of niche mortgage products 51
The low-documentation mortgage market 51
The non-conforming mortgage market. 53
The reverse mortgage market 54
Innovations in the mortgage market 55
National’s Risk-Based Loan 55
Mortgage products for First Home Buyers 56
Innovation in the shared equity loans 58
Innovation in the reverse mortgage market 59

Chapter 4
Future decoded
Mortgage lending commitments, 2006-2010 60
Total mortgage lending commitments will reach AUS$279.9 billion by 2010 61

Supplementary data 65
Definitions 72
Research methodology 72
Future readings 73
Current publications 73
Future publications 74
Relevant links 74
Our custom research capabilities 74
Asia Pacific SPP writing team 76
How to contact experts in your industry
List of Tables
Table 1: The underlying macroeconomic variables of Our forecasting 61
Table 2: Housing and other personal credit aggregates, 2001-2005 65
Table 3: Housing credit aggregates per adult, 2001-2005 65
Table 4: Bank and non-bank credit aggregates for housing, 2001-2005 65
Table 5: Bank credit aggregates for owner-occupied and investment properties, 2001-2005 66
Table 6: Lending commitments for owner-occupied and investment properties, 2001-2005 66
Table 7: Housing Equity injected/withdrawn, 2001-2005 67
Table 8: Number of loans by lender, 2001-2005 67
Table 9: The average size of loans by lender, 2001-2005 68
Table 10: Lending commitments for owner-occupied properties by purpose, 2001-2005 68
Table 11: Number of dwellings financed for first home buyers, 2001-2005 69
Table 12: Housing lending commitments and securitizations, 2001-2005 69
Table 13: The value of mortgage lending per bank and respective market shares in 2004 and 2005
Table 14: Percentage growth over the 2004-2005 period for mortgage lending in owner-occupied
and investment housing 70
Table 15: Mortgage loans outstanding for the largest five competitors in the Australian mortgage
market, 2001-2005 71
Table 16: Forecast of mortgage lending commitments, 2006-2010
List of Figures
Figure 1: Housing credit aggregates stood at AUS$723.8 billion at the end of 2005, equivalent to
85.9% of total consumer credit aggregates 14
Figure 2: Housing aggregates have outstripped GDP to now be approximately 3.2 times the size of
GDP 15
            Figure 3: Housing credit aggregates per adult now surpasses AUS$44,000 in 2005 16
            Figure 4: Housing lending has grown faster than personal disposable income while personal lending
            has fallen away altogether 17
            Figure 5: Credit aggregates for investment properties amounted to AUS$179.9 billion at the end of
            2005 equivalent to 33.8% of total mortgage lending 18
            Figure 6: Lending commitments peaked at the end of 2005 at AUS$211.5 billion most likely
            reflecting the resurgence in owner-occupied housing 19
            Figure 7: Refinancing has risen as a proportion of lending commitments from 19.1% to 27.9% in
            2001 and 2005 respectively 21
            Figure 8: Net housing equity withdrawal has been a trend since 2001 but has fallen significantly
            since peaking in 2003 22
            Figure 9: The cash rate target has increased twice since the end of 2003 but remains low at 5.5%
            Figure 10: Lending rates for housing are a mirror image of the cash rate target over the same
            period 25
            Figure 11: First home buyers are returning to the market with 23,000 more loans in 2005 than
            2004, up by 25.2% 29
            Figure 12: Over the 2001-2005 period the average amount borrowed by FHBs and existing
            homeowners has converged 30
            Figure 13: The level of securitization has risen by almost AUS$150.0 billion over the 1990-2005
            period 34
            Figure 14: The proportion of securitization to total housing lending commitments has compounded
            annually at 27.4% over the 2001-2005 period 35
            Figure 15: The number of loans fell after 2003 but have increased significantly over the 2004-2005
            period by 9.2 % 38
            Figure 16: In December 2005 the Commonwealth Bank was the market leader with AUS$123.2
            billion in loans outstanding and 9.2% growth in loans over the 2004-2005 period 40
            Figure 17: Market shares have changed over the 2004-2005 period and Bendigo Bank has
            disappeared from the top ten altogether 42
            Figure 18: Amongst the major banks, ANZ and NAB showed the strongest growth in both owner-
            occupied and investment housing lending. For the smaller banks, ING and BankWest achieved
            significant success in owner-occupied lending 44
            Figure 19: At the end of 2005 HSBC had the largest proportion of investment housing lending with
            56.0% followed by Adelaide Bank with 38.2% 46
            Figure 20: Lending to housing is rising in similar proportions for credit unions and building societies
            Figure 21: The top five may be losing some market share but they still dominate loans outstanding
            with 77.0% of the market 50
            Figure 22: ANZ experienced market share growth over the 2001-2005 period while the other banks
            maintained or lost market share 50
            Figure 23: Total mortgage lending commitments will grow to AUS$279.9 billion by 2010 62
            Figure 24: Lending commitments for refinancing of owner-occupied properties will amount to
            AUS$57.7 billion by 2010 63
            Figure 25: Our core consulting capabilities 76

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