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Mortgage Innovation Ideas for Australia 2006
Market Report, November 2006, 2375  €


Description

IntroductionAustralia's mortgage market is becoming increasingly competitive with new players regularly making an entrance.
Players are fighting harder than ever to maintain market share.
This report analyzes mortgage innovations that will help players maintain and gain market share.
It answers questions such as: what makes products successful; what products are destined to be introduced in the future?Scope*Explores the Australia mortgage market to profile and critique its most innovative products.*Explores innovations occurring overseas and discusses their potential success in Australia.*Gives insight into the future of this market and how mortgage lenders, government and property developers could respond.HighlightsMortgages that offer a cash-back feature are likely to attract new customers, however when the customer must pay the cash back if they want to leave the current lender, this feature also acts as a customer retention strategy.
This is just an example of the ideas that this report discusses.Canadian mortgage providers are far more innovative than Australian lenders, although they also face similar economic conditions as their Australian counterparts.
Mortgage products in Canada offer suitable models to improve market shares of Australian lenders.Lenders in Australia tend to be more concerned with customer acquisition rather than retaining their customers.
While this report discusses different customer acquisition strategies, retention strategies that are currently employed in Australia are also discussed.Reasons to Purchase*Learn about the latest innovations in Australia's mortgage market, how successful they have been and the reasons behind this success.*Learn about global innovations that are designed for customer acquisition and those that are designed for customer retention.*Gives Australian lenders a competitive edge by allowing them to differentiate their mortgage proposition through the acquired knowledge.

Sommaire
 
CHAPTER 1 INTRODUCTION 8
What is the scope of this report? 8
Who is the target reader? 8
How to use this report 9
CHAPTER 2 SETTING THE SCENE 10
The strong performance of Australia's mortgage market has resulted in an increase in the number of non-bank lenders, driving the competitiveness of the market 10
Lending commitments in the mortgage market have grown from A$127.4 bn to A$211.7 bn over the 2001-2005 period 10
Since 1996, more than 28 non-bank players have entered the market 13
Traditional lenders' market shares have been threatened and in some cases eroded 15
CHAPTER 3 NICHE MARKETS 18
The targeting of niche market reflects the evolving nature of Australia's mortgage market with overseas markets offering further lessons 18
Shared equity mortgages are expected to improve housing affordability for first time buyers 18
SEMs have not yet been introduced in Australia 19
Initially, SEMs were poorly received in the UK, although they still have significant potential in first time buyers market 20
In the future, SEMs must protect borrowers against negative equity and be fully explained to the borrower 22
Graduate mortgages target the needs of young professionals hoping to enter the property market 22
No 'graduate mortgages' exist yet in Australia although interest is beginning to gather 22
Lenders in the UK have realised the potential of the graduate market 23
Australian mortgage providers could take a leaf out of the UK providers book 25
Reverse mortgages are gaining in popularity with retirees looking to transform a proportion of the home equity into cash and improve their standard of living 26
Despite the small size of the reverse mortgage market, there are more than 20 providers of this product in Australia 26
Mortgages that are designed to help divorcees get back on their feet 28
Mortgages that give borrowers 'maternity leave' 30
Mortgage products and services to purchase property overseas 32
Barclays turns facilitator for foreign property investment 32
CHAPTER 4 PRODUCT AND PRICING STRATEGIES 36
Overseas mortgage markets offer innovative product and pricing strategies that have significant potential in Australia 36
The rate of innovation in Australia's mortgage market has slowed with just one innovative product entering the market over the last year 36
HSBC's Home Rewards loan is a product that has an innovative pricing structure to encourage customer loyalty 37
Some innovations occurring overseas are focused on customer acquisition 39
? 'Transferring made easy' 39
? 'RateCapper' Mortgage 40
? 'Cash Back Mortgage' 41
? 'Borrowing' from superannuation funds for a deposit 43
Lenders are also introducing new strategies for retaining clientele 45
The correct customer retention strategy will vary between lender and by clients 46
CHAPTER 5 DISTRIBUTION CHANNELS 49
2006 has seen significant innovation in the delivery of mortgage products in Australia 49
Four new entrants to the mortgage market are distributing their products via the Internet only 49
'Chat rooms' on the Internet provide a place where people can discuss mortgage options 52
Financial planners have become a key delivery option as consumers seek to improve their financial situation 53
CHAPTER 6 APPENDIX 55
Supplementary data 55
Definitions 59
Balances outstanding 59
CAGR 59
Cash rate target 59
Gross advances 59
Lending commitments 60
Non-conforming 60
Research methodology 60
Primary research 60
Secondary research 60
Future readings 60
Relevant links 61
Datamonitor's custom research capabilities 61
Asia Pacific SPP writing team 63
How to contact experts in your industry 63
List of Tables
Table 1: BankWest's reverse mortgage will be more appealing to those retirees under the age of 65 where the LVR is constant at 25%, after this point, they are more likely to be attracted to other providers' products such as Bluestone's Equitytap 28
Table 2: Housing lending commitments over the 2001-June 2006 period 55
Table 3: Lending and credit aggregates over the 2001-June 2006 period 55
Table 4: A list of non-bank mortgage providers and the year they entered the market 56
Table 5: The proportion of lending by institution in 1996, 2001 and 2006 57
Table 6: Number of divorces, 1983,1993, 1996-2005 57
Table 7: Number of live births, 1995-2005 58
Table 8: Total proposed investment associated with approved proposals, by country of investors and industry sector 58
List of Figures
Figure 1: Lending commitments saw the strongest growth in 2003 with a subsequent fall in 2004. Since then the market has improved and is expected to reach a new peak at the end of 2006 12
Figure 2: Credit aggregates grew from A$385.1 bn in January 2001 to A$770.9 bn in June 2006 13
Figure 3: Over the 1996-2000 period, a large number of providers entered the market with those entering over the 2004-2006 period introducing different innovations to gain an edge over incumbents 15
Figure 4: Over the 1996-2006 period, there was an increase in the value of lending by wholesale lenders while banks lost market share 17
Figure 5: The number of divorces was fairly stable over the 1996-2005 period, with 54,967 divorces being granted in 2005 29
Figure 6: The number of live births is volatile although over the 2002-2005 period has remained relatively stable at an average annual rate of 44,445 31
Figure 7: The value of foreign investment from Asian countries in Australian real estate has increased dramatically over the last four years 35
Figure 8: HSBC's Home Rewards loan encourages customer loyalty as borrowers receive a discounted interest rate which drops to 0.75% from the fourth year onwards 38
Figure 9: RBC's RateCapper is an innovative mortgage that limits the interest rate for borrowers 41
Figure 10: Datamonitor's core consulting capabilities 62
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