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More borrowers are turning to brokers as economic uncertainty persists, NAB’s latest trend report for brokers has revealed.
NAB’s First Half Property Update 2023, produced in collaboration with CoreLogic’s analysis, showed consumer spending has notably slowed in the first half of 2023 and highlighted further slowing as rising interest rates continue to affect households, raising the likelihood of a recession.
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The Reserve Bank of Australia (RBA) has hiked the cash rate 12 times, bringing the cash rate to 4.1 per cent, with NAB forecasting the cash rate to reach a higher peak of 4.6 per cent, further contributing to consumption slowdown throughout the second half of the year and into 2024.
As such, NAB’s latest trend report for brokers revealed a growing number of borrowers seeking credit advice amid economic uncertainty.
NAB’s executive for broker distribution Adam Brown acknowledged the current economic challenge and the strain on consumers.
“There’s no doubt some customers are feeling the pinch of higher living costs and rising interest rates, and our economy is facing headwinds,” Mr Brown said.
However, he also noted that the lending environment has never been more competitive, opening opportunities for the third-party channel.
“The better brokers can understand current market dynamics, and what to expect from property markets in the coming months, the better equipped they will be to help customers,” Mr Brown said.
The report reiterated the significant increase in borrowers turning to brokers for credit advice, with 61.3 per cent of mortgages written through third-party channels, up from 55.1 per cent a year ago.
This trend reflects consumers’ growing appreciation for the value that brokers bring, particularly in a dynamic and uncertain economic environment, the report noted.
The report also identified a 3.4 per cent rise in national housing values since February, following a decline in 2022.
However, despite the increase, housing values still remain 6.0 per cent below peak levels recorded in April 2022.
Factors contributing to the decline in housing values include rising interest rates, housing affordability constraints, lower consumer sentiment, and the expiration of COVID-19-related fiscal support before interest rates started to rise in May last year.
NAB has recently revised its house price forecasts, indicating that home values are now expected to end the year up 4.7 per cent, rather than down 4 per cent, as previously anticipated, due to increased demand and limited supply.
According to CoreLogic’s executive research director for Asia Pacific, Tim Lawless, the current upswing in housing values differs from previous growth cycles that were driven by policy changes or fiscal incentives.
“Growth in housing values has been occurring in the absence of these factors and is attributable to low available housing supply running up against rising housing demand,” Mr Lawless said.
While there is upward pressure on housing values, the spring season could see an increase in housing supply as home owners decide to sell, he explained.
“But a shortage of newly built homes and record levels of net overseas migration will mean demand outstrips supply for some time to come,” Mr Lawless said.
Indeed, the housing market performance will largely depend on interest rates, with Mr Lawless warning of a potential for a ‘double-dip’ downturn in housing values if rates rise significantly and remain elevated for an extended period.
As such, the overall outlook for housing values remains uncertain amid expectations of higher interest rates, weaker economic conditions, and stretched household balance sheets.
[Related:NAB revises up house price forecast]
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