Open banking, cheap interest rates and liar loan crackdowns: What 2020 borrowers can expect

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on February 17, 2020
Open banking, cheap interest rates and liar loan crackdowns: What 2020 borrowers can expect

Photo by Candice Picard on Unsplash

The rebound in the home lending market is set to pick up speed in 2020 following the slowest rate of mortgage lending growth in the past decade.

That's according to global consultancy firm Deloitte, which has published its annual Australian Mortgage Report, giving insights into what the industry expects for the year ahead.

But for that to happen, NAB's General Manager of Home Lending Paul Riley said there needs to be more housing construction, consumer income and confidence - all of which are currently in short supply.

"There are very few houses available for sale at the moment. This is impacting house prices, and the ability for many customers to be able to get on the housing ladder or be looking for their next house," Mr Riley said.

"If you take recent market data, supply is down 13-15% year on year in terms of the number of houses in market. Future building and renovation permits are also lower, and consumer confidence is at the lower end of the scale.

"For the market to sustainably grow, we need to be building more houses and for customers to have more income and confidence."

The Deloitte roundtable also asked what the likely outcomes would be across a number of aspects around mortgage lending in 2020.

If you're a borrower or are thinking about taking out a home loan, here's what to expect this year.

Thinking about refinancing to a low-rate owner-occupier home loan? Below are a handful of low-rate loans in the market. 

Lender
Advertised rate Comparison rate* Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
FixedMore details
NO UPFRONT OR ONGOING FEES

Basic Home Loan Fixed (Principal and Interest) (LVR < 70%) 3 Years

NO UPFRONT OR ONGOING FEES
FixedMore details
  • Easy, digital application process
  • Market leading app to help you pay off your loan sooner
  • No on-going fees
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
VariableMore details
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEESFEE FREE OFFSET

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

Variable Owner Occupied, Principal and Interest (Refinance Only)(LVR <75%)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.

Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of January 26, 2022. View disclaimer.

More first home buyers in the market

With the First Home Loan Deposit Scheme well underway, many of those surveyed said first home buyers would be the customer segment with the greatest growth in 2020.

But some of the major banks displayed concern at first home buyers getting into the market.

NAB's Mr Riley said "it still remains a very challenging situation for first home buyers".

"The Federal Government's scheme is a really positive step. For the customers who utilise the scheme, it will certainly quicken their time to achieving having their own home. The largest challenge for this segment is raising the 20% deposit while keeping pace with market price growth," he said. 

ANZ's General Manager for Home Loans John Campbell said affordability for first home buyers remains a challenge.

"For a medium-priced home in Sydney it still takes around 11 years to save for a 20% deposit. Melbourne is a little better at 9.6 years, while the national average is 8.6 years," Mr Campbell said.

"Banks are doing our bit to support first home buyers, so it is not a question of desire or ability to make credit available to that segment, but more about how to get them into the market responsibly."

Open banking to put power in hands of borrowers

With open banking set to roll out later this year, the biggest impact it would have on borrowers is more competitive, tailored products.

ING's Head of Third Party Glenn Gibson said the benefits of open banking could be huge if customers can put their trust in it.

"The uptake of technology will be completely driven by customers, with the benefits usually the driver of this uptake. There is no doubt customers are concerned about their data and this is also where trust is vital," Mr Gibson said.

"I certainly think there'll be massive benefits to customers when organisations leverage the opportunities of open banking and deliver amazing new customer experience. We will really start to see the opportunities open banking can deliver when customers can see the benefits for themselves."

But Equifax Group Managing Director Lisa Nelson was less positive.

"Until the industry can offer amazing consumer value, I believe it [open banking] is a lot of hype right now," Ms Nelson said. 

"You need to have a rock star consumer value proposition to get the customer to engage in open banking." 

Crackdown on 'liar loans'

Lenders are looking to protect themselves by cracking down on those who lie on their home loan applications.

At an Australian Retail Credit Associated conference, Ms Nelson said "there was a lot of conversation around how to hold consumers accountable".

"One of the issues that bubbled up was about consumer accountability and truth telling. We dug into that as part of our Comprehensive Credit Reporting data for research, working on it with the larger lenders. We can see that at least 36% of a consumer's debt was not disclosed when they made an application," Ms Nelson said. 

ANZ's Mr Campbell said while not being fully aware of all your outstanding credit cards is understandable, "not disclosing all outstanding debts is more difficult to comprehend."

Borrowers turning away from the big four

Ms Nelson said with the big four banks losing their market share, the focus is on newer players.

"If you look across all the four big banks from February 2018 to September 2019 - the big four have dropped about 4% market share in total. Fintechs are on the rise, but still nascent," she said.

One of those fintech lenders is Athena. Co-founder and CEO Nathan Walsh said there have been two key drivers behind the billion dollars of home loans they've written since launching.

"There has been a significant loss of trust in incumbent lenders. The majority of borrowers do not know their current rate of interest - and historically this has caused a bias towards borrowers simply accepting the loan they are in," Mr Walsh said. 

"Customers are saying: 'I don't know the current rate on my loan, but I know it doesn't start with a two' as a prompt to action and a prompt to think differently."

ANZ's Mr Campbell said the bigger banks need to step up to the plate.

"Clearly when customers are choosing to use a specific channel, they are telling us there is something they find easier, simpler or faster," he said.


Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Emma Duffy is Assistant Editor at Your Mortgage and  Your Investment Property Mag, which are part of the Savings Media Group. In this role, she manages a team of journalists and expert contributors committed to keeping readers informed about the latest home loan and finance news and trends, as well as providing in-depth property guides. She is also a finance journalist at Savings.com.au which she joined shortly after its launch in early 2019. Emma has a Bachelor in Journalism and has been published in several other publications and been featured on radio.

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