Consultancy Forecasts Contraction In Mortgage Lending In 2010

Post by NeilMc on December 15, 2009 · Under Australian Economy, Business News, Mergers & Acquistions, banking, home loans, interest rates · Comment

Amid an environment of the gradual phasing out of first time home buyer grant and rising interest rates, an industry forecaster says it believes that mortgage lending could decline in 2010.

Market Intelligence Strategy Centre (MISC), a consultancy that examines actual mortgage settlements across all industry lenders says that mortgage lending fell by 6 per cent during the quarter ending September, the first such decline in five quarters.

The consultancy’s forecast for a further reduction in owner occupied and investor mortgage lending contradicts projections made by the majors.

ANZ expects and expansion in home lending by 6.5 per cent, a 1 per cent reduction in the expansion of 7.5 per cent that occurred in 2009.

“I’d be surprised if it’s a negative figure (in 2010). The risk of a contraction increases if rates continue to rise, but at the moment they’re still relatively low.” ANZ’s senior economist Shane Lee told The Australian.

The central bank raised interest rates by 25 basis at the start of December, the third consecutive raising in as many months.

During his statement on monetary policy, RBA governor Glenn Stevens said that housing credit was continuing to expand at a solid pace.

MISC however claims to be using a different set of data in order to make its prediction. Information based on new lending flows as opposed to APRA figures which accounts for accumulated lending.

The consultancy says the decline in home lending during the September quarter was as a result of the phasing out of first time home buyers grant, as well as a result of a tightening in lending criteria initiated by major lenders.

MISC said the extension of the first home buyer scheme to December 31, instead of its planned October expiry, would delay the bottoming out of the mortgage market until the March quarter.

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