Lenders to enjoy continued mortgage growth

Despite tight margins in the home loan mortgage market from unrelenting competitive pressure, the profit outlook for banks and lenders is upbeat. The Australian Financial Review reports that strong interim results reported by the banks are likely to be repeated in full year results.

The banks are likely to benefit this half from borrowers who held off taking out loans in anticipation of rate cuts early in the year. The short-term money market had also priced a rate cut in before it actually happened meaning the banks benefited from a positive margin spread in their cost of funds. The spread between mortgage rates and bank bill rates has since narrowed.

Analysts say ANZ and St George are best placed to show improvement in the climate of home lending growth.

BankChoice has previously noted that distribution is now the primary driver of lending growth for the market players. Analysts commented that they expect the mortgage referrals business from brokers to increse to 40 per cent from a current level of around 25 per cent.

Whilst ANZ has positioned itself well to take advantage of the growing mortgage broker market, St George has been the advantage of a good deposit taking stratgey allowing extra retail funding of loans. St George have recently placed an interesting spin on product innovation with its home equity loan product.