March 08: Lenders warned of 'bleak' outlook

In an interview with Mortgage Business, Fujitsu Consulting’s Martin North predicted a grim outlook for sufferers of severe mortgage stress – those needing to refinance or sell their homes.

All 300,000 households suffering severe mortgage stress are not necessarily going to default; however some of these households will and with the possibility of further interest rate rises the situation doesn’t look encouraging, Mr North said.

Australian First Mortgage’s (AFM) director of sales and marketing Iain Forbes also predicted that increased stress on borrowers will spell a difficult year ahead for the mortgage industry.

“To think that interest rates will rise further is a concern for the whole country,” he said. “It is a concern for every household, every lender and AFM.”

Origin head James Brooks said the wholesale funder would be keeping a close eye on borrower stress but said he had not observed any significant changes from previous months.

“People may be tempted to shop around for cheaper loans and we could see a shift in borrowers looking to online providers who may have lower fees,” he said.

Mr Brooks said mortgage managers wanting to protect their loan books may need to look at restructuring their loans. “There’s certainly no room to move with rates so they’ll need to look to other areas such as offering interest-only loans to help borrowers get by,” he said.

Mr Forbes advised industry peers to be prudent with budgeting and to watch their bottom lines. “For a business trip, fly economy, not business class, and spend your advertising dollars carefully,” he said.

Mr Forbes also recommended that mortgage businesses monitor human resource costs by looking at recruitment expenses, linking salaries with productivity and give careful consideration to any wage rises.

“Every manager and lender needs to watch their spending. Now is no time to be extravagant,” he said.

Written by Staff Reporter

Last Updated: 09 March 2022

Published: 18 March 2008