Sophisticated solutions suit slow sector

Australia’s residential mortgage market is at the lowest level of growth it has been since 2001 forcing major lenders to resort to new strategies to survive the slow period, according to research from Deloitte.

Detailed in its second annual mortgage report Broadening the Horizons, Deloitte said growth in this sector peaked at 13 per cent in 2005, a stark difference from the 22 per cent it reached the year before.

Deloitte actuarial and advisory partner James Hickey said this would require lenders to shift their focus to profitable growth, rather than market share.

“Product and pricing led strategies will not be enough this coming year,” he said.

“The biggest question for major lenders is where will their growth come from?

“The report identified that incumbent lenders have begun product reach strategies, with large lenders in particular getting into sub-prime lending, including low doc and no-doc loans.

“But once one major lender moves in that direction, others can quickly follow.

“If banks can deepen and lengthen their existing customer base and hold those customers for longer they will have a competitive advantage.”

He said such an approach would involve using sophisticated analytics to improve retention rates, develop more agile pricing techniques, produce targeted solutions for customers and create a better than average loan life.

He added that changes in demographics and the ageing population required new products and strategies, such as reverse mortgages for the baby boomers and the possibility of equity share products for Generation Y, in order to compete with the sluggish growth.