Australia’s banks are tipped to fiercely compete for the business of owner occupiers in the next year, meaning even better deals for consumers.
Australia’s largest mortgage broker AFG’s managing director Brett McKeon predicts already aggressive competition will intensify as banks focus on the owner-occupier market, saying the banks are quite liquid at the moment and wanting growth.
“I think the owner-occupier end of the market’s going to be quite fiercely contested over the next 12 months and that’s probably where most of the focus will be,” Mr McKeon told AAP.
“It’s hard to see better terms than what you’ve got but I think it might be possible.”
Mortgage holders are already benefiting from record low interest rates, with the Reserve Bank of Australia keeping the cash rate on hold at two per cent on Tuesday.
Mr McKeon said he would not be surprised if the banks undertake further discounting in areas such as upfront rates, application fees and ongoing fees.
Where the discounting has stopped is in the investment loan area.
“That’s been very evident in the last quarter,” he said.
Many banks have tightened their guidelines for lending to housing investors, either making loans tougher to get or more expensive.
Loans to investors have been driving growth in lending for housing, with the investor segment running at about double the growth rate for owner occupiers.
CommSec chief economist Craig James notes, however, that Australia is not witnessing unprecedented interest by investors in the housing market.
He said from 1991 to 2008 the annual growth of investor home loans was consistently stronger than it is today, peaking at 39 per cent in 1991, almost four times the current growth rate.
“Clearly people do the sums and they realise that they’re getting value for their money going into the housing market rather than going into other assets,” Mr James said.
“There’s still a degree of wariness about putting your money in the share market after the global financial crisis.”
Mr James cautions that a large influx of new homes coming on to the market in the next two years will likely mean supply exceeds demand and a possible substantial fall in prices.
“The bottom line is we’ve got demand exceeding supply, the new homes are being built and in 18 months/two years, those homes are going to be coming on to the market. No doubt in some regions of Australia there’s going to be indigestion problems as that new supply has to get absorbed.”
INVESTORS DRIVING GROWTH IN HOUSING LOANS
* Investor housing credit up 0.8 pct in May; annual rate 10.4 pct
* Owner-occupier credit up 0.4 pct; annual rate 5.7 pct
* Investment loans 36.9 pct of AFG loans in June (April peak 43.1 pct)
Source: RBA, AFG.