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Australian Mortgage Market: Forecasts and Future Opportunities

Australian Mortgage Market: Forecasts and Future Opportunities


This brief presents a review of the condition of the Australian residential mortgage market in 2014 before examining the critical factors that will determine the future of the market. The brief concludes with a forecast of mortgages held by different types of buyers (owner-occupiers, first-time buyers, and investors) and held in different products (offset, reverse and interest only mortgages)


  • Sculpt more targeted strategies by utilizing analysis of key mortgage market developments.
  • Stay competitive by understanding the various demand and supply side factors that will determine the shape of the market going forward.
  • Inform your future plans with our five-year forecast of gross advances for niche product lines.
Reasons To Buy
  • Which factors will impact the supply of mortgage lending?
  • Which factors will affect consumer demand for mortgages?
  • Which sectors offer the best prospects and opportunities for expansion over the next few years?
  • What will be the market share of key mortgage sectors over the next few years?
Key Highlights

The first-time buyer segment is expected to remain depressed in 2015, though it is expected to revive in the later years of the forecast. Providers looking to target this segment should lead with products that allow customers to overcome affordability constraints and the difficulty of building up sufficient deposits for a down payment.

While owner-occupiers still dominate the market, the investor segment has shown rapid growth in recent years, and current market conditions will support this trend. Interest-only and offset mortgages continue to dominate product types. While interest rates remain low, Verdict Financial expects no change to the popularity of these products.

Foreign investors are expected to show continued demand in Australian property. As currency swings have depressed the value of the Australian dollar in favor of overseas investors, this segment is expected to remain extremely active in the property market, and to a lesser extent the Australian mortgage market as well.

  • Executive Summary
    • The residential mortgage market in Australia will top A$2tn in 2019
    • Key findings
    • Critical success factors
  • The Mortgage Market in Australia
    • The Australian mortgage market has experienced higher levels of activity
      • Australia's residential mortgage market was worth A$1,479bn at the end of 2014
      • The Australian mortgage market has been firing on all cylinders
      • A growing market has not meant growing profit margins
      • Recent mortgage activity has been dominated by refinancing, leading to less growth and more churn
      • Broker usage has rebounded from 2010, approaching peaks last seen prior to the financial crisis
      • The conversion of mutuals into banks has artificially inflated bank business but this will be less of a factor in future
      • Flexible fixed-rate options will become essential
  • The Future Decoded
    • The market expansion will continue with a stronger 2015
      • Growth will be front end-loaded over the forecast period
      • Non-ADI sourced mortgages will be see steady growth as securitization funding recovers
      • The bank market is set for strong and enduring growth in balances outstanding
      • Growth in the mutual sector is forecast to pick up as fewer credit unions and building societies convert into banks
      • Mortgage growth will be affected by a range of factors
  • Market Trends
    • The owner-occupied market will be driven by consumer confidence
      • Patchy consumer confidence will moderate growth at the margins of the owner-occupier market
      • Australian buyers are competing with foreign investors and temporary residents
        • Table Gross advances and approved foreign investment for residential property (A$m), 2010/11-2013/14
    • First-time buyer activity will remain below historic levels in the short term
      • Loan size among first-time buyers is growing faster than wages
        • Table First-time buyer activity in Australia, 2009-14
      • Providers should offer products that help Australians onto the property ladder
      • Government policy is becoming more targeted, aiming to increase housing supply
    • Investor activity will be supported by government policies and rising prices
      • Sydney house prices have become increasingly detached from the rest of the market
      • Government policy will remain supportive of the investor segment
    • Standing out from the rest of the market has become a challenge
      • Fixed-rate products will regain their prominence after rates begin to tighten
      • Home loan packages have become a standard option in Australia but there is scope for growth
        • Table Top 20 mortgage lenders by home loan package feature, 2015
      • While dampened by heightened demand for fixed-rate mortgages, loans with offset facilities will remain a mainstay of the market
      • Negative gearing and investment loans will continue to support demand for interest-only mortgages
      • While forecast to grow in value, reverse mortgages will decline as a share of the market
      • Non-standard loans will remain niche
        • Table Estimated and forecast non-conforming loan balances outstanding (A$bn), 2011e-15f
  • Appendix
    • Abbreviations and acronyms
    • Supplementary data
      • Table Outstanding mortgages to households issued by banks (A$bn), 2014-19f
      • Table Outstanding mortgages to households issued by mutuals (A$bn), 2014-19f
      • Table Outstanding mortgages to households by product issued by all ADIs (A$bn), 2014-19f
    • Definitions
    • Methodology
      • 2015 Retail Banking Survey
    • Bibliography
    • Further reading

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