Westpac will not aggressively pursue above-average growth in the mortgage market as a number of different lenders enter the market, chief executive Gail Kelly said at the Trans Tasman Business Circle luncheon yesterday.
Kelly, in her first major speech since commencing her role at the bank, also warned housing prices in Melbourne are now becoming a little too heated.
She said while Westpac’s mortgage portfolio had grown over the past year to cope with demand from first home-owners, will now seek more average growth as demand backs off and more players enter the market.
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“We see growing at about system growth, perhaps a little more. We were pleased to support customers last year, but for this period we see new players coming back into the market. System growth would be what we think is the sustainable level for us.”
“The need or demand in the home lending area was strong over the past 18 months, we were well placed because of our brands to play that role in supporting that need. Our growth was strong, pretty much twice system growth.”
And while Kelly said she would not want to speculate on how high interest rates would eventually become, she said the Reserve Bank of Australia looks set to increase rates again this year.
She also addressed the housing market, saying the RBA appears to be managing growth by raising interest rates. She said this would eventually cause demand to decrease.
“I think we are seeing signs of very strong price appreciation, but I think in a rising interest rate environment those rates do have the effect of taking that demand away and I think that’s what the RBA has in their sights. They want to manage the growth. I expect to see another interest rate rise over the next period of time, and then I think they will pause for a while. “
“We don’t want to have asset bubbles. The housing market is very solid, but buyers are remaining cautious. We are making sure growth is managed in this area.”
Kelly addressed Melbourne’s market directly, saying that price growth in the city has been “very strong, but perhaps a little too hot. We don’t want to see price exaggeration. There is plenty of demand, but we believe people are remaining cautious.”
Her comments come after the most recent RP Data figures show Melbourne’s prices increased by 5.4% in the quarter ending 30 March, with a median price of $455,000.
While Kelly did not say whether the bank would increase its business lending practices, she did say that “we expect business investment to pick up, and we would be hoping for that as well.”
She also addresses small businesses customers who may be struggling with cashflow issues, saying that Westpac is willing to speak with businesses if they come to the lender directly about their issues. “We would welcome and encourage any customer of ours to speak to us directly so we can best help them.”