Contents:

Chapter 1 Introduction Scope 10 Who is the target reader? 10 How to use this report 10 Chapter 2 Market overview Key findings 12 Market Growth 13 The Australian mortgage market in terms of housing credit aggregates 13 The Australian mortgage market in terms of lending commitments 18 Market drivers 23 The mortgage market continues to be supported by favourable conditions 23 Conditions are favourable for first home buyers 27 The Vendor Transfer Tax lives a short life 32 The increasing trend of securitization 32 Chapter 3 Competitive dynamics Key findings 36 Market shares 37 The mortgage market continues to be highly competitive 37 The top ten bank players, 2005 38 The performance of building societies and credit unions 46 The performance of specialist mortgage providers 48 The performance of banks, 2001-2005 49 The burgeoning growth of niche mortgage products 51 The low-documentation mortgage market 51 The non-conforming mortgage market. 53 The reverse mortgage market 54 Innovations in the mortgage market 55 National’s Risk-Based Loan 55 Mortgage products for First Home Buyers 56 Innovation in the shared equity loans 58 Innovation in the reverse mortgage market 59 Chapter 4 Future decoded Mortgage lending commitments, 2006-2010 60 Total mortgage lending commitments will reach AUS$279.9 billion by 2010 61 Conclusion APPENDIX Supplementary data 65 Definitions 72 Research methodology 72 Future readings 73 Current publications 73 Future publications 74 Relevant links 74 Our custom research capabilities 74 Asia Pacific SPP writing team 76 How to contact experts in your industry List of Tables Table 1: The underlying macroeconomic variables of Our forecasting 61 Table 2: Housing and other personal credit aggregates, 2001-2005 65 Table 3: Housing credit aggregates per adult, 2001-2005 65 Table 4: Bank and non-bank credit aggregates for housing, 2001-2005 65 Table 5: Bank credit aggregates for owner-occupied and investment properties, 2001-2005 66 Table 6: Lending commitments for owner-occupied and investment properties, 2001-2005 66 Table 7: Housing Equity injected/withdrawn, 2001-2005 67 Table 8: Number of loans by lender, 2001-2005 67 Table 9: The average size of loans by lender, 2001-2005 68 Table 10: Lending commitments for owner-occupied properties by purpose, 2001-2005 68 Table 11: Number of dwellings financed for first home buyers, 2001-2005 69 Table 12: Housing lending commitments and securitizations, 2001-2005 69 Table 13: The value of mortgage lending per bank and respective market shares in 2004 and 2005 70 Table 14: Percentage growth over the 2004-2005 period for mortgage lending in owner-occupied and investment housing 70 Table 15: Mortgage loans outstanding for the largest five competitors in the Australian mortgage market, 2001-2005 71 Table 16: Forecast of mortgage lending commitments, 2006-2010 List of Figures Figure 1: Housing credit aggregates stood at AUS$723.8 billion at the end of 2005, equivalent to 85.9% of total consumer credit aggregates 14 Figure 2: Housing aggregates have outstripped GDP to now be approximately 3.2 times the size of GDP 15 Figure 3: Housing credit aggregates per adult now surpasses AUS$44,000 in 2005 16 Figure 4: Housing lending has grown faster than personal disposable income while personal lending has fallen away altogether 17 Figure 5: Credit aggregates for investment properties amounted to AUS$179.9 billion at the end of 2005 equivalent to 33.8% of total mortgage lending 18 Figure 6: Lending commitments peaked at the end of 2005 at AUS$211.5 billion most likely reflecting the resurgence in owner-occupied housing 19 Figure 7: Refinancing has risen as a proportion of lending commitments from 19.1% to 27.9% in 2001 and 2005 respectively 21 Figure 8: Net housing equity withdrawal has been a trend since 2001 but has fallen significantly since peaking in 2003 22 Figure 9: The cash rate target has increased twice since the end of 2003 but remains low at 5.5% 24 Figure 10: Lending rates for housing are a mirror image of the cash rate target over the same period 25 Figure 11: First home buyers are returning to the market with 23,000 more loans in 2005 than 2004, up by 25.2% 29 Figure 12: Over the 2001-2005 period the average amount borrowed by FHBs and existing homeowners has converged 30 Figure 13: The level of securitization has risen by almost AUS$150.0 billion over the 1990-2005 period 34 Figure 14: The proportion of securitization to total housing lending commitments has compounded annually at 27.4% over the 2001-2005 period 35 Figure 15: The number of loans fell after 2003 but have increased significantly over the 2004-2005 period by 9.2 % 38 Figure 16: In December 2005 the Commonwealth Bank was the market leader with AUS$123.2 billion in loans outstanding and 9.2% growth in loans over the 2004-2005 period 40 Figure 17: Market shares have changed over the 2004-2005 period and Bendigo Bank has disappeared from the top ten altogether 42 Figure 18: Amongst the major banks, ANZ and NAB showed the strongest growth in both owner-occupied and investment housing lending. For the smaller banks, ING and BankWest achieved significant success in owner-occupied lending 44 Figure 19: At the end of 2005 HSBC had the largest proportion of investment housing lending with 56.0% followed by Adelaide Bank with 38.2% 46 Figure 20: Lending to housing is rising in similar proportions for credit unions and building societies 47 Figure 21: The top five may be losing some market share but they still dominate loans outstanding with 77.0% of the market 50 Figure 22: ANZ experienced market share growth over the 2001-2005 period while the other banks maintained or lost market share 50 Figure 23: Total mortgage lending commitments will grow to AUS$279.9 billion by 2010 62 Figure 24: Lending commitments for refinancing of owner-occupied properties will amount to AUS$57.7 billion by 2010 63 Figure 25: Our core consulting capabilities 76