New regulatory measures and an increase in home listings will have an impact
National Australia Bank’s head of personal banking predicts that mortgage applications will remain strong through the end of the year, before an increase in home listings and new regulatory measures begin to cool the market in 2022.
NAB’s Rachel Slade also said that while tech players were now a part of the financial services sector, a “level playing field” when it came to regulation was necessary to ensure the same rules in the payments sector and other areas like buy-now-pay-later, according to a report by The Australian.
Slade said she expected home lending to finish 2021 strong before prices start to moderate next year.
“We’re going to have a really strong run right up to Christmas,” Slade told The Australian. “What we are seeing is listings lift in the capital cities and a bit more stock coming on to the market, which I think is ultimately a good thing for house prices’ [growth to moderate]. It’s a bit early to see the impacts of affordability changes; they only came on November 01. They won’t flow through to prices and settlements until well into the early part of next year, so it’s still very busy out there.”
Slade said that NAB was still seeing strong mortgage application flows – “maybe just a pinch softer than last month, but compared to six months ago still really strong.”
Last month, in an effort to cool the red-hot housing market, the Australian Prudential Regulation Authority raised the buffer rate that banks must use in calculating a borrower’s ability to repay. Since the introduction of the new measure, auction rates have started to recede from very high levels in most capital cities, The Australian reported. NAB’s base-case scenario shows house-price growth slowing to 5.5% in the year ending Sept. 30, 2022. That would be a significant drop from the 20.6% growth rate for the 12 months ended Oct. 31 of this year.
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NAB also predicted that housing credit growth will slow from 6.5% this year to 5.1% in 2022, The Australian reported.
Slade stopped short of providing NAB’s market-share target, The Australian reported – even as some of its competitors struggle with their own mortgage businesses. ANZ is trying to remedy radically increased mortgage turnaround times, and Westpac has had to introduce heavy discounts to regain market share.
“In home lending you’ve got to get this balance between meeting your customer needs and meeting your shareholder returns,” Slade told The Australian. “...Our focus there is really on safe growth. We are not a price leader in the market – you have to be there, certainly, in the pack in pricing – but where we are really getting great feedback is on that experience and our service.”
NAB currently has 14.4% of the mortgage market, well behind the nation’s largest home lender, Commonwealth Bank, The Australian reported.
