Consumer Lending in Australia

Growth in overall consumer lending

Consumer lending in Australia continued in 2017 to record a positive performance. This was primarily driven by the unrelenting demand for housing that led to double-digit growth for mortgages/housing.

Tipping point in housing growth

The housing market in key cities across Australia in 2017 saw strong growth that pushed house prices to rise at low double-digit annual rates; however, tightening of investor loan requirements resulted in a decline in foreign demand, an increasing number of house completions and the imposition of stricter regulations on interest-only loans by regulator APRA, which led to a softening of the housing market. Many analysts revised down their forecasts in these key cities and are expecting a pullback in the housing market.

The arrival of technology-driven payment solutions

Technology-driven payment solutions, such as Afterpay and zipPay, grew in popularity over the review period. These payment solutions, which have strong appeal among millennials, allow consumers to gain ownership of consumer goods without having to pay the full cost immediately.

Low wage growth holds back consumer spending

Low wage growth, significant mortgage loans and rising costs meant that households found it challenging to meet mortgage repayments from their current income and had to cut back in other areas such as auto, durables and home lending. Reserve Bank of Australia is concerned that elevated levels of household debt may limit consumption growth.

Mortgages/housing set to heavily influence the performance over the forecast period

Mortgages/housing, which accounted for close to half of total gross lending in 2017, is expected to influence the performance of consumer lending over the forecast period. The housing market in Australia was one of the most-talked-about subjects over the review period and the performance of the housing market will heavily influence the performance of consumer lending in Australia.

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