Suncorp Appointments a Customer Advocate

Suncorp has today announced the appointment of a Customer Advocate to drive better outcomes and experiences for its nine million customers.

Chief Customer Experience Officer, Mark Reinke, said the new function would work across the business to identify and deliver opportunities to provide even better services to customers.

The function will be led by Executive General Manager Customer Experience & Group Customer Advocate, Debra Tagg. Ms Tagg has been instrumental in designing new and improved customer experiences, developing and embedding customer culture and leading customer strategy and insights since she joined Suncorp in 2010.

“With her passion for delivering strategic customer programs across Suncorp and her strong background in customer service, Debra is the ideal choice to drive Suncorp’s focus for this role,” Mr Reinke said.

“She will be an integral part of all strategic programs that influence customer outcomes, as well as play a leading role in Suncorp’s Financial Inclusion Action Plan.

“We’re committed to increasing transparency and accountability around the decisions we are making for our customers every day. This new function will challenge our current processes, identify areas for improvement and make it easier for customers when things go wrong.”

Banking & Wealth CEO David Carter said the appointment delivers on a banking industry commitment to better protect customer interests, but will also cover Suncorp’s significant insurance business.

“Suncorp’s new business strategy is centred on delivering greater value for our customers, which this new function will help us achieve,” Mr Carter said.

“With new products and services coming online this year to transform how we help Australians manage critical decisions in their lives, a Customer Advocate will help to ensure our approach is grounded and delivering for our customers.”

The Customer Advocate will have direct access to our Group CEO & Managing Director and will build on Suncorp’s culture where all employees put customer advocacy at the heart of what they do.

New Home Starts continue to Ease from Peak

ABS data on building activity indicate that new dwelling starts have passed their record peak, said the Housing Industry Association (HIA).

During the September 2016 quarter, only New South Wales (+5.4 per cent) and Queensland (+6.3 per cent) saw increases in new dwelling commencements. The largest decline was in the ACT (-39.6 per cent) followed by South Australia (-20.0 per cent). There were also large reductions in Western Australia (-13.6 per cent) and Victoria (-9.6 per cent). Falls in new dwelling starts also occurred in the Northern Territory (-7.6 per cent) and Tasmania (-0.6 per cent) during the September 2016 quarter.

“New dwelling starts hit all-time record levels during 2016, but today’s data provides further evidence that we’ve left the peak behind,” commented HIA Senior Economist, Shane Garrett.

During the September 2016 quarter, new dwelling commencements fell by 2.8 per cent in seasonally-adjusted terms to 55,070. Detached house starts were down by 1.8 per cent compared with the previous quarter, while multi-unit commencements dipped by 3.9 per cent. Over the year to September 2016, new dwelling commencements totalled some 229,336.

“The result for the September 2016 quarter represents the second consecutively quarterly decline in new dwelling starts, with a substantial portion of the reduction happening on the multi-unit side,” explained Shane Garrett.

“In contrast, detached house starts have been holding up quite well. The upturn in new home building between 2012 and 2016 was heavily influenced by increased apartment building with output more than doubling,” Shane Garrett pointed out.

“With new home building set to move lower over the next few years, we expect that the higher density market will have to absorb the bulk of the reduction. From a peak of over 230,000 starts during 2015/16, we anticipate that new home starts will continue to ease over the next couple of years and bottom out at around 172,000 during the 2018/19 financial year,” Shane Garrett concluded.

ABA Responds To Independent Retail Banking Commission Review

The ABA, in a media release has responded to the paper which has been released, and which questioned whether good customer outcomes and product commission payments were possible. It warned that the use of upfront and trailing commissions and their effect on incentivising sales may potentially lead to poor customer outcomes.

The Australian Bankers’ Association has today welcomed the release of Mr Stephen Sedgwick’s issues paper from his independent review into commissions and payments made to bank staff and third parties.

“Banks want to ensure that they pay their staff to do the right thing by customers, and we will work on any areas that need improving,” ABA Executive Director – Retail Policy Diane Tate said.

“This review is part of an industry-wide look at some of the influences on culture in banks, such as leadership and people and performance management.

“In recent years banks have made changes to remuneration practices to place more of an emphasis on good behaviour rather than sales targets, in light of changing community expectations and regulatory requirements; however there is more to do.

“It is important that banks get the balance right between rewarding employees and getting the best results for customers.

“Banks have committed to changing or removing payments that could lead to poor customer outcomes,” she said.

“Importantly, the issues paper has not identified systemic issues warranting the outright banning of product based payments. However, the paper does highlight the importance of culture, good governance, performance management systems, compliance checking, and communications across the organisation and by management, as all related to remuneration.

“The ABA looks forward to providing another submission to Mr Sedgwick to help complete his review. This is a complex area with mixed views so we encourage interested parties to have their say,” Ms Tate said.

In addition to reviewing payments for the selling of retail banking products like deposit accounts and mortgages, the Sedgwick Review will also comment on overarching principles on how banks pay and incentivise all executives and employees.

More information on the Sedgwick Review is available at

As I recall the ABA were central to the establishment of the review in the first place, (mitigating the pressure for an independent financial services review) and perhaps they are surprised that the independent review is questioning commissions! We shall see.


Risk of commission-related incentivisation “not insignificant”

From Australian Broker.

A new report on the retail banking remuneration review has warned that the use of upfront and trailing commissions and their effect on incentivising sales may potentially lead to poor customer outcomes.

In the Issues Paper on Remuneration in Retail Banking released yesterday (17 January), independent reviewer Stephen Sedgwick AO said industry risks were “amplified” through the use of accelerators such as larger commissions for greater volumes of sales through the broker channel.

The review which was commissioned by the Australian Bankers’ Association said that the banks’ reluctance to move away from commission-based arrangements suggested that “the risk of commission-related mis-selling was not insignificant”.

“Indeed, data was presented to the review that suggested that third-party mortgages are likely to be larger, paid off more slowly, and more likely to be interest-only loans than those provided to equivalent customers who dealt directly with bank staff.”

However, he added that this data was “suggestive rather than conclusive” given the fact that mortgages need to satisfy a bank’s credit assessment and responsible lending requirements at all times.

With the growth of the third party market segment, Sedgwick said that brokers provide a service valued by mortgage holders. Thus, any move to eliminate or reduce commissions in Australia would need to maintain a competitive balance.

Another area of risk was that while banks implemented risk mitigation devices to protect against mis-selling within (including compliance checks and performance management), they were not employers of third party channels and thus may not have as many options available to combat improper behaviour, he said.

“Usually banks use contractual terms to enforce appropriate behavioural norms, which in practice may be enforced more readily in a franchise or profit-sharing model than otherwise.”

With ASIC currently reviewing the mortgage broking industry, he said the retail banking review would examine ASIC’s report once it was published to gain further insights on the matter.

Sedgwick called for further information on a number of areas relating to third party channels and asked for submissions on the following questions:

  1. Is there sufficient evidence to support a case for banks to discontinue the practice of paying volume-based commissions to third parties in respect of new and increased mortgages?
  2. If a move away from commissions cannot be justified, should banks desist from paying on the basis of accelerator-like arrangements (including bonus commissions)?
  3. Is there evidence that the contractually-based risk mitigation devices available to banks in respect of third parties are deficient in avoiding poor customer outcomes?

Submissions can be sent to

One in five homeowners will struggle with rate rise of less than 0.5%


ONE in five Australians are walking such a fine mortgage tightrope that they could lose their homes if interest rates rise by even 0.5 per cent.

Our love affair with property has pushed Australia’s residential housing market to an eye-watering value of $6.2 trillion.

But as we scramble over each other to snap up property while interest rates are at historic lows, we have gotten ourselves into a bit of a pickle. We might not actually be able to afford funding our affair.

An analysis, based on extensive surveys of 26,000 Australian households, compiled by Digital Finance Analytics, examined how much headroom households have to rising rates, taking account of their income, size of mortgage, whether they have paid ahead, and other financial commitments. And the results are distressing.

It showed that around 20 per cent — that’s one in five homeowners — would find themselves in mortgage difficulty if interest rates rose by 0.5 per cent or less. An additional 4 per cent would be troubled by a rise between 0.5 per cent and one per cent.

Almost half of homeowners (42 per cent) would find themselves under financial pressure if home loan interest rates were to increase from their average of 4.5 per cent today to the long term average of 7 per cent.

“This is important because we now expect mortgage rates to rise over the next few months, as higher funding costs and competitive dynamics come into pay, and as regulators bear down on lending standards,” Digital Finance Analytics wrote.

The major banks have already started increasing their home loan rates this year, despite the market broadly expecting the Reserve Bank to keep the cash rate steady at 1.5 per cent this year.

Just this week NAB upped a number of its owner-occupied and investment fixed rate loans.

“There are a range of factors that influence the funding that NAB — and all Australian banks — source, so we can provide home loans to our customers,” NAB Chief Operating Officer, Antony Cahill, said of the announcement.

“The cost of providing our fixed rate home loans has increased over recent months.”

So as interest rates rise and leave mortgage holders in its dust, it leaves a huge section of society, and our economy, exposed and at risk.


Martin North, Principal of Digital Finance Analytics, said the results are concerning, albeit not surprising.

“If you look at what people have been doing, people have been buying into property because they really believe that it is the best investment. Property prices are rising and interest rates are very low, which means they are prepared to stretch as far as they can to get into the market,” Mr North told

But the widespread assumption that interest rates will remain at historic lows is a disaster waiting to happen, especially in an environment where wage growth is stagnant.

“If you go back to 2005, before the GFC, people got out of jail because their incomes grew a lot faster than house prices, and therefore mortgage costs. But the trouble is that this time around we are not seeing any evidence of real momentum in income growth,” Mr North said.

“My concern is a lot of households are quite close to the edge now — they are not going to get out of jail because their incomes are going to rise. We are in a situation where interest rates are likely to rise irrespective of what the RBA does … There has already been movement up.”

Australia’s wages grew at the slowest pace on record in the three months to September 2016, according to the latest Wage Price Index released by the Australian Bureau of Statistics (ABS).

And as a result Australia’s debt-to-income ratio is astronomical. The ratio of household debt to disposable income has almost tripled since 1988, from 64 per cent to 185 per cent, according to the latest AMP. NATSEM Income and Wealth report.

What this means is that many Australian households are highly indebted, thanks in large part to the property market, without the income growth to pay it down.

“The ratio of debt to income is as high as it’s ever been in Australia and there are some households that are very, very exposed,” Mr North said.


This finding will come as a surprise: young affluent homeowners are the most at risk — it is not just a problem with struggling families on the urban fringe. When it comes to this segment of the market, around 70 per cent would be in difficulty with a 0.5 per cent or less rise. If rates were to hike 3 per cent, bringing them to around the long term average of 7 per cent, nine in ten young affluent homeowners would feel the pressure.

“It is not necessarily the ones you think would be caught. And that’s because they are actually more able to get the bigger mortgage because they’ve got the bigger income to support it.

“They have actually extended themselves very significantly to get that mortgage — they have bought in an area where the property prices are high, they have got a bigger mortgage, they have got a higher LVR [loan-to-valuation ratio] mortgage and they have also got lot of other commitments. They are usually the ones with high credit card debts and a lifestyle that is relatively affluent. They are not used to handling tight budgets and watching every dollar.”

And while the younger wealthy segment of the market being most at risk might not be of that much importance compared to other segments, Mr North said what is concerning is the intense focus on this market.

“Any household group that is under pressure is a problem for the broader economy because if these people are under pressure they are not going to be spending money on retail and the broader economy,” Mr North told

“The banks tend to focus in on what they feel are the lower risk segments and the young affluent sector has actually been quite a target for the lending community in the last 18 months. Be that investment properties or first time owner-occupied properties, my point is there is more risk in that particular sector than perhaps the industry recognises.”


Now an argument is mounting that Australian banks need to toughen up their approach to home lending.

“I think we have got a situation where the information that is being captured by the lenders is still not robust enough. I am seeing quite often lenders willing to lend what I would regard as relatively sporty bets … I’m questioning whether the underwriting standards are tight enough,” Mr North said.

This includes accepting financial help from relatives for a deposit, a growing trend among first home buyers.

“The other thing that I have discovered in my default analysis is that those who have got help from the ‘Bank of Mum and Dad’ to buy their first property are nearly twice as likely to end up in difficulty … It potentially opens them to more risk later because they haven’t had the discipline of saving.” contacted several banks for comment on whether they think a rethink of their underwriting standards is needed. Only one lender, Commonwealth Bank, agreed to comment, but remained vague on the topic.

“In line with our responsible lending commitments, we constantly review and monitor our loan portfolio to ensure we are maintaining our prudent lending standards and meeting our customers’ financial needs. Buffers and minimum floor rates are used when assessing loan serviceability so it is affordable for customers,” a CBA spokesman said in an emailed statement.

But Mr North said something needs to be done before we find ourselves in a property and economic downturn.

“I’m assuming that with the capital growth we have seen in the property market, it will allow people who get into significant difficulty to be able to get out, however, it’s the feedback concern that I’ve got.

“If you have got a lot of people in the one area struggling with the same situation, you might see property prices begin to slip. If we get the property price slip, and we get unemployment rising and interest rates rising at the same time, we have that perfect storm which would create quite a significant wave of difficulty.

“We need to be thinking now about how to deal with higher interest rates down the track. We can’t just say it will be fine because it won’t be,” he told

Home loan rates heading higher as funding costs rise, competition eases

From The Australian Financial Review.

Mortgage rates are set to rise for both fixed and variable rate borrowers this year as global interest rates shoot higher, competition eases and capital rules begin to bite.

“Borrowers should assume we are at the bottom of the interest rate cycle – in fact we are probably already past it,” housing finance expert Martin North of Digital Finance Analytics told The Australian Financial Review.

Australia’s banks have cited higher funding costs as a reason for increasing fixed-rate home loans. On Monday National Australia Bank became the last of the big four banks to lift fixed-rate loans in recent months, citing higher funding costs as it raised rates on two, three and four-year mortgages.

The main cause of these higher funding costs for fixed-rate loans was a sharp rise in Australian medium-term bond rates from September to December as rising commodity prices, rising inflation and a shift in global monetary policy rhetoric forced traders to question the thesis that rates would stay low indefinitely.

Bond rates kicked up again following the election of Donald Trump in the US, forcing the three-year Australian swap rate to 2.35 per cent from an all-time low of 1.75 per cent in September. Australian interest rates rates tend to closely track movements in global bond rates and are expected to rise further this year, which will force costs higher for prospective borrowers seeking a fixed interest rate.

“Capital markets have seen a price hike since Trump, and as a result banks are having to pay more for wholesale funding – a critical element in bank funding,” Mr North said.

While rates on standard variable mortgage loans are not impacted by medium-term moves in the bond market, they too could edge higher this year if traders’ bets that the Reserve Bank is more likely to hike than lower interest rates prove correct.

For most of last year bond markets had priced in cuts for this year, but as global bond rates have shot higher rate cuts have all been but priced out – with markets prescribing just a one in 13 chance that the cash rate will fall this year. Meanwhile, traders are attaching a one in three probability that the Reserve Bank will raise the cash rate to 1.75 per cent before the end of the year.

Mr North said the global outlook and initial indications of the policy stance of new Reserve Bank governor Phil Lowe mean rate reductions appear unlikely.

“It depends on the Reserve Bank’s view on inflation versus property [risks from lower rates],” Mr North said. “Investment loans are hot, so I think it’s an even bet as to whether they raise rates.”

Australian Bureau of Statistics figures released on Tuesday showed mortgage lending to investors, which has concerned regulators, jumped by 4.9 per cent in November, up from 1.5 per cent in October – to the highest level since July 2015.

While base interest rates are likely to have the largest bearing on borrowing costs, other factors such as wholesale and deposit funding costs and capital requirements, and the level and intensity of competition among the banks for new loans will influence mortgage rates too.

Mr North, however, said that the signs are that competition pressures are easing, which will remove the downward pressure on home loan rates evident last year.

“The banks have realised that the deep discounting we saw in 2016 was a race to the bottom, so the banks are going to be sassier from here and that means higher rates,” he said.

Another potential upward force is the chance of further increases in capital when the Basel committee on banking supervision finalises its Basel III capital framework.

Mr North said this year will be characterised by differentiated pricing between customers with low risk, ‘low loan to value’ borrowers, that is, those who have a higher deposit, receiving favourable rates while riskier ‘high loan to value’ borrowers will pay more.

“The thing about Basel is it’s translating more of the portfolio risks into capital calculations so different types of borrowers attract different charges,” he said.

One positive for borrowers is that two important components of bank funding costs have moderated.

Concerns have been raised that banking rules that come into effect in early 2018 and prioritise retail deposits over other forms of funding will increase competition for savings, forcing up deposit costs. From January next year Australia’s banks will have to meet a prescribed ‘net stable funding ratio’ aimed at limiting the risk of a bank run by funding their loans with stable sources such as deposits.

So far, however, the evidence is that banks are not competing aggressively for savings, by increasing term deposit rates, as they were six months ago.

Analysis compiled by Deutsche Bank this week shows that deposit margins, measured as a spread over the bank bill rate, had declined significantly from August, when they rose to about 0.40 percentage points over the bank rate to below 0.20 percentage points. Online saving rates have also declined in recent weeks.

“While deposits remain a headwind to margins, these trends illustrate the continuing easing of deposit spread pressures,” Deutsche analyst Andrew Triggs wrote.

Wholesale bank funding costs, as measured by credit spreads, also appear to have moderated despite significant market uncertainty.

The cost of insuring against the default of a major Australian bank’s debt for five years is now around 64 basis points, its lowest level for 18 months, and well below the 10-year average of 100 basis points. Australian bank credit default swaps are a proxy for wholesale funding costs.

Brexit, Trump and the TPP mean Australia should pursue more bilateral trade agreements

From The Conversation.

Brexit, Trump’s protectionist agenda and the debacle of getting everyone to ratify the unpopular Trans-Pacific Partnership (TPP) are all a global trend towards bilateral trade agreements.

This is good news for Australia. With its manifold set of strong free trade agreements, Australia is geared up to reap the early gains of this new trend.

The domestic squabble between Prime Minister Malcolm Turnbull and Opposition Leader Bill Shorten on whether the “the TPP is dead in the water” meant that Turnbull’s ongoing support for the Regional Comprehensive Economic Partnership (RCEP) went unnoticed. This signals that, unlike the TPP, the Chinese-led trade deal RCEP is alive and well, and that both sides of Australian politics support it.

Considering the existing spaghetti bowl of international economic partnerships, Australia is already in the fast lane of bilateral trade agreements with the US and China. In fact, Australia is the second largest economy and trading partner of the only six countries that have in place free trade agreements with both the US and China. The group includes South Korea, Singapore, Chile, Peru’ and Costa Rica.

If Australia quickly wraps free trade agreements with Canada, the European Union and the United Kingdom, Australia will be the only major trading link among these countries, with evident growth opportunities on favourable terms.

When it comes to trade deals already in force, Australia’s trade portfolio includes many bilateral agreements, but only one regional trade agreement (with the Association of Southeast Asian Nations).

Department of Foreign Affairs and Trade/The Conversation, CC BY-ND

Trade deals with multiple countries are dead

Promoting international trade has always been important to Australia’s economy, to encourage growth, attract investment and support business. For the past two decades Australia has been expanding its trade policy agenda with multilateral, regional and bilateral trade agreements.

There are only two multilateral trade agreements under negotiation which involve Australia. One is under the World Trade Organisation (WTO) umbrella (the Environmental Goods Negotiations) and the other is in competition with the WTO system (the Trade in Services Agreement – TiSA).

The tumultuous political events of 2016 in the US and Europe confirm Kevin Rudd’s remark that “the West has turned inward”, while the Asia Pacific region is emerging as the torchbearer for free trade and economic integration.

For the past few years there’s been disagreement on which type of agreement is best for Australia’s trade policy: multilateral, regional or bilateral.

The failure of the WTO’s Doha round of trade negotiations has undermined the credibility of the multilateral trading system. With the US and Japan denying China the market economy status sanctioned by its WTO accession, multilateralism is further out of question.

When a country grants China market economy status, it can no longer impose punitive anti-dumping tariffs on Chinese-made goods. More than ten years ago, Australia was fast to recognise China’s full market economy status as a precondition of the China-Australia Free Trade Agreement (ChAFTA), which entered into force on 20 December 2015.

If multilateralism is dead, regional trade agreements are also not looking so good outside of Asia. With the rise of Trump and anti-EU sentiment, the Transatlantic Trade and Investment Partnership (TTIP) is lost at sea, and so is the EU-Canada Comprehensive Economic and Trade Agreement (CETA).

The benefits of bilateralism

Australia has a once-in-a-generation economic opportunity to exploit the cracks opened in the international trading system by the stark return to bilateral agreements. Australia is already poised to negotiate two such agreements with Canada and the EU.

Brexit is creating further ripples in the economic diplomacy waters. For example, in Canberra there are loud voices calling for “absolutely free” trade between Australia and the UK. According to some, a full-blown China-US trade war fought on currency manipulation is the single biggest economic threat to Australia. A falling Chinese currency in combination with US protectionist measures would dampen the Chinese economy by way of reduced volumes of exports and higher interest rates spreading across the Asia Pacific and pushing down the price of commodities.

However, it’s highly unlikely that monetary dynamics alone will damage Australia’s “rocks and crops” economy. The growing productivity of the agricultural and mining sectors is strong enough to rise above global tensions and falling commodity prices. Australia’s export volumes in key markets are poised to further rise in a situation where trading partners will already be warring for the best market and investment opportunities.

A protectionist western economy across the Atlantic will further swing the global pendulum of economic growth to Asia. It will also amplify the positive effects of further economic integration in that region for Australia.

When the RCEP comes into force, Australia will have privileged access to China’s One Belt One Road (OBOR) initiative, the so called new Silk Road. This development will lead to massive infrastructure investment and trade opportunities for Australia, even more so as it has the comparative advantage of being a highly developed economy with privileged access to Western know-how.

As cynical as it may sound, at present Australia’s economic fortunes depend on juggling free trade with both a commanding Asian region and a disunited west. Essentially, if Australia manages to keep a trade policy that is geopolitically neutral, its economy will thrive on unsavoury developments.

Some of these include the success of Trump’s protectionist agenda, which may deteriorate the US relations with NATO and the EU, to the point of fuelling European nationalism and disintegration.

Another questionable development, yet positive for Australia, is Japan’s re-militarisation to contain China’s rise. The preservation of the postwar institutional framework that guarantees economic openness and the prospect of economic and political security in the the Asia Pacific region may soon require tough choices for Australia and Japan.

With Japan standing in for the US security role in East Asia, Australia would take a sweet deal to become the neutral and peace-monger Switzerland of Asia.

Author: Giovanni Di Lieto, Lecturer, Bachelor of International Business, Monash Business School, Monash University

Theresa May confirms: Britain is heading for Brexit Max

From The Economist.

For the past few months Theresa May and her ministers have allowed some ambiguities to swirl around Britain’s future relationship with the European Union. Yes, she confirmed in her conference speech in October, Brexit would take it beyond the jurisdiction of the European Court of Justice and the EU’s free movement regime. Some found this hard to square with reports that special arrangements would be sought for parts of the British economy (like the City of London and carmaking) or with Mrs May’s assurance to businesses that she would seek to avoid a “cliff edge” on Britain’s exit from the club. Many in other European capitals questioned whether Britain would leave at all.

To the extent that such uncertainties persisted despite her endless choruses of “Brexit means Brexit”, at a speech to EU ambassadors in London on January 17th Mrs May put them to the sword. Britain will leave the single market and the customs union, and will thus be able to negotiate its own trade deals with third-party economies. It will not pay “huge sums” to secure sectoral access (a phrase whose precise meaning now matters a lot). She wants this all wrapped up within the two years permitted by Article 50, the exit process she will launch by the end of March; ideally with a “phased process of implementation” afterwards covering things like immigration controls and financial regulation. In other words there will be no formal transitional period. There will, in fact, be a cliff edge of sorts.

This reflects two realities to which policymakers in Britain and on the continent must now get accustomed. First, Mrs May unequivocally interprets the vote for Brexit as a vote for lower immigration even at the cost of some prosperity. Never mind that the polling evidence supporting this assumption is limited: such is now the transaction at the heart of the new government’s political strategy. Second, even allowing for a certain amount of expectation-management, it seems Mrs May is not placing huge importance on the outcome of the talks. She wants a comprehensive free-trade agreement (FTA) based on the one recently signed between the EU and Canada; but where “CETA” took about seven years to negotiate, she has permitted herself two. She said that this might cover finance and cars, but also recognised the importance the EU places on the “four freedoms” (making freedom of movement a condition of market membership), suggesting a realism about the extent of any such FTA in the narrow time constraints available. Mrs May also wants some associate membership of the customs union but declared herself relaxed about the details. In short: she will do her best, but if the talks come to little or nothing, so be it.

Of course, they will be tough. The prime minister will want firstly to maximise the scope of the FTA, secondly to maximise the benefits of any associate relationship with the customs union and thirdly to minimise the precipitousness of the cliff off which British firms will fly in 2019. She hinted at how she intended to do so, characterising the country’s current defence and security co-operation with the continent as a possible negotiating chip and warning that her government could “change the basis of Britain’s economic model” (i.e. turn it into a tax haven) if the EU does not play nice. She also said that she would be willing to walk out on the talks: “no deal…is better than a bad deal.”

So Britain’s economy is in for a rough ride and, though the government will try to smooth it out, the priority is getting the country out of the EU in the most complete and rapid way possible. If the price of this priority is economic pain, then pay Britain must. All of which gives firms some of the certainty they have craved since June 23rd: those fundamentally reliant on continental supply chains or the EU “passport” for financial services, say, now have the green light to plan their total or partial relocation. It also means the Brexit talks will be simpler and perhaps even less fractious than they might have been had Britain tried to “have its cake and eat it”. The country will eat its cake and live with an empty plate afterwards. Brexit really does mean Brexit.

More Australians lumped with mortgage later in life

From The Real Estate Conversation.

Because they are delaying the purchase of their first home, more Australians will have a mortgage later in life, according to The Australian Housing and Urban Research Institute.

As increasing numbers delay the purchase of their first home, more Australians are left with a mortgage when they hit retirement age, according to The Australian Housing and Urban Research Institute.

Recent data from the Australian Bureau of Statistics shows that in 2000-01 just over 60% of Australians bought their first home when they were between the ages of 25 and 34 years old. In 2013-14, that number had fallen to just under 50%.

The number of Australians buying their first home when they are between the ages of 35 to 44 has increased from 18.9% in 2000-01 to 26.2% in 2013-14.

The AHURI report also reveals that, according to ABS data, 8.2% of households aged 65 and over were still paying off their mortgage in  2013-14, more than double the rate of 3.6% recorded in 2000-01.

The data is available from the ABS here.

Home Lending On The Rise

The latest housing finance data from the ABS underscores the renewed momentum in home mortgage lending, especially in the investment sector, and there was also a rise in first time buyers accessing the market.

  • The trend estimate for the total value of dwelling finance commitments excluding alterations and additions rose 0.6%. Investment housing commitments rose 1.7%, while owner occupied housing commitments was flat.  In seasonally adjusted terms, the total value of dwelling finance commitments excluding alterations and additions rose 2.2%.
  • In trend terms, the number of commitments for owner occupied housing finance fell 0.1% in November 2016 whilst the number of commitments for the purchase of new dwellings rose 0.7%, the number of commitments for the construction of dwellings rose 0.2%, and the number of commitments for the purchase of established dwellings fell 0.2%.
  • In original terms, the number of first home buyer commitments rose by 13.4% to 8,281 in November from 7,302 in October; the number of non-first home buyer commitments also rose. The number of first home buyers as a percentage of total owner occupier commitments rose from 13.7% to 13.8%.

Total commitments in trend terms was $32.7 billion, of which $19.8 billion was owner occupied loans, and $12.9 billion for investment purposes. 39.5% of new lending was for investment purposes, and we see the proportion of investment loans continuing to rise, it is already too high.

Looking at the month on month movements, the seasonally adjusted changes highlight the rise in the investment funding for new construction, with a 40% rise on last month. Owner occupied refinancing fell.

The more reliable trend analysis shows the monthly movements, with a strong surge in investment loans by individuals, and a stronger fall in owner occupied refinancing.

Looking at total loan stock (in  original terms) around 35% of all loans outstanding are for investment purposes, and the slide we saw late 2015 appears to be easing.

Turning to the first time buyer, original data, the number of first time owner occupied buyers rose compared with last month, and the overall mix also increased.

Combining the first time buyer property investor data from our surveys, we see a spike in overall first time buyer activity.

Last month, around 1,100 more first time buyers entered the owner occupied market than the prior month (12%), and around 150 more in the investment sector.  We also saw a rise in the fixed rate loans, as borrowers try to lock in lower rates ahead of expected rises.

So overall, still strong momentum in the housing sector, and powered largely by an overheated investment sector.