Australia's $1.4 trillion home loan industry is set for another strong year, following record breaking mortgage figures in 2014, as little stands in the way of growth of up to 10 per cent.
With the official interest rate at a record-low 2.25 per cent, home loan origination will increase between six and 10 per cent this year, only held back by rising unemployment and a regulator crackdown on speculation, according to Deloitte's 2015 mortgage report.
"At present it’s a case of ‘let the good times roll’ for those in the property market,” Deloitte financial services partner, James Hickey, said.
Deloitte said the mortgage market was heading into 2015 with strong tail winds. Property prices are robust, with strong returns in Sydney and Melbourne and lenders were experiencing negligible levels of mortgage losses.
“If house price growth does moderate over the next few months, either by the RBA’s discussions or just running out of steam, there will be far less pressure for interest rates to rise in 2015," Mr Hickey said.
"Settlements across Australia on a monthly basis in 2014 averaged $28 billion, with a monthly record of $33bn in December. That is the highest single monthly settlement rate on record, and a clear jump since the onset of the GFC, when settlements struggled to reach $20bn," he said.
The bull-run in the home loan market last year was out of trend, largely due to pent up demand from existing homeowners to upgrade, refinance and restructure, Mr Hickey said.
Commonwealth Bank propriety lending support general manager James Sheffield said after loan settlements grew 20 per cent in 2014, the home loan market was set to relax slightly as China's economy slowed, the jobless rate increased, and global regulation rose.
"There are also concerns about higher loan to value ratios and investment lending, which mean the recent extraordinary growth in NSW will slow," Mr Sheffield said.
"I’m more bearish than I was initially," he said. "I think we’re driving towards a period of flatter economic growth.”
While digital approaches are disrupting the home loan market, Deloitte's report said customers still gravitated to trusted relationships with brokers, with competition among lenders "the most intense it has been for years".
"More than 52 per cent of mortgages written are going through a mortgage broker," Pepper Group chief financial officer Mario Rehayem said.
But it wasn't all good news, as low interest rates were hampering first home buyers with property price gains far exceeding wage growth, Deloitte said.
"Affordability and debt servicing levels remain high in Australia...and first home buys are continuing to struggle to enter the housing market," Mr Hickey said.
"So while we may celebrate the strength in the market, we need to be cognisant that it is still a market with challenges as well as opportunities."
The RBA has said it is concerned at the pace of house price growth, but has not advocated new macro-prudential policies to calm house prices.
Housing lending was up 7 per cent for the 12 months to November, while residential building approvals grew 8 per cent over the year to September. Approvals have been steadily increasing over the last few years, rising 6 per cent for the same period in 2013, and 3 per cent in 2012.
“We anticipate the improvement in housing construction activity to extend through 2015 and beyond, with state governments working to reduce supply side constraints," Deloitte Access Economics partner David Rumbens said.