Flagging consumer sentiment, record low housing affordability and the global credit crunch are all expected to take their toll on Australian mortgage lending over the next year and a half.
According to Datamonitor, a slower period ahead will drag lending commitments for residential mortgages down to growth at an annual average rate of just 5.8 per cent over the next five years.
This compares to average annual growth rates of more than 12 per cent over the last 15 years.
Peter Ingemarsson, financial analyst at Datamonitor said; “Global turmoil in the financial markets has increased risk aversion in both lenders and borrowers.”
The report predicts that the slowdown will hurt all lenders but conditions may be hardest for non-banks due to reliance on wholesale funding via capital markets.
While the forecast for the next 12-18 months may be bleak, Datamonitor expects the market to remain strong in the long term and forecast that lending commitments would reach $349 billion by 2012.
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