Credit growth continues to be dampened as the slowing economy and tighter serviceability requirements reduce demand. Adding to affordability challenges, house prices are recovering and remain on an upward trajectory. Although the pace of increases is slowing down, population growth and lags to new housing supply could keep a floor under house prices for some time.1
Amid these tighter financial conditions, demand for both residential mortgages and business credit slowed significantly over the 12 months to September.2 Total housing credit grew just 4.2%, well down from its most recent high of 7.9% during the first half of 2022. Refinancing, which has been a key driver of mortgage growth, appears to be slowing too.3 Business credit growth - still a robust 6.8% - was also well down from its high of 13.8% in October 2022.4 To support lending growth, most of the banks are easing serviceability criteria for borrowers with good credit history and substantial equity.
Mortgages have long been the traditional banking growth engine. But the challenging environment has put business lending firmly back on the agenda. To gain a competitive edge, banks must also do more to close the customer expectation gap. Consumers expect banks to provide similarly engaging, hyper-personalised and frictionless experiences as e-commerce platforms. Research by EY teams in Asia-Pacific found that for 80% of customers, the expectation of an experience was as important as the product, yet only 8% received the experience they wanted.
Much of this expectation gap comes from banks’ inability to generate the detailed customer journey data needed to extend personalisation from a single product to the whole of the customer relationship. Banks need to re-think their data strategy and architecture with the right platform tooling to enable real-time data intelligence. Integrating progressive technologies with existing platforms and data will empower banks to monetise insights by delivering event-based personalisation.