Tag: Mortgage Industry

More Clues To Home Price Falls Ahead

DFA research was featured in a number of the weekend papers, discussing the rising number of mortgage loan applications which are being rejected by lenders due to tighter lending standards, meaning that many households are unable to access the low refinance rates currently on offer.

NEARLY half of all homeowners are now shackled to their mortgage, with refinance rejections up significantly cent in less than a year as banks rattled by the royal commission drastically tighten borrowing rules.

 

Loan sizes are being slashed by 30 per cent, trapping many financially stressed customers including some who have been slugged with “out of cycle” interest rate rises. House hunters are also being hit by the credit crunch, with dramatic implications for property markets. The crunch stems from two big shifts in the way banks judge borrowers.

Expense estimates have been raised substantially — the minimum outgoings for an average household are now assumed to be a third higher, according to bank analysts UBS.

On top of this, granular cost breakdowns must be provided. After the royal commission revealed in March that expense checks were so lax as to be borderline illegal, new tests have been imposed requiring in some cases detail of weekly, fortnightly, monthly, quarterly and annual spending in as many as 37 categories from alcohol and haircare to shoes and pets, as well as doctor visits.

As a result, we think that now four in 10 households would now have difficulty refinancing.  That means you are basically a prisoner in the loan you’ve currently go. This is based on our 52,000 household surveys plus data from a range of official sources. We estimate that 31,000 households’ refinance applications were rejected in July versus 2,300 in August last year.

Comparison service Mozo’s lending expert Steve Jovcevsk said . “There’s such a huge pool of people who are in that boat.” The most common motivation among those seeking to refinance was to save money by finding a better deal. Many were feeling the pinch because living costs were rising faster than wages and rates on interest-only or investment loans had increased.

The main issue these households are facing in seeking a new deal was banks’ definition of a “suitable loan now is different to six months ago because of the royal commission” and a clampdown by the Australian Prudential Regulation Authority. So there has been a big rise in loan rejections, particularly refinancing.

The borrowing power of hosueholds are being crimped, as shown on the banks website mortgage calculators. Those calculators, compared to a year or 18 months ago, are now on average showing a 30 per cent lower number. For some, the reduction in borrowing power is even greater. The head of UBS’s bank analysis team Jon Mott said that for a household with pre-tax income of $80,000 would get 42 per cent less from a bank; for a $150,000-a-year household, would get 34 per cent less.

Mozo’s Mr Jovcevski said in one example he was personally aware of, a person pre-approved to borrow $630,000 last year was recently offered just $480,000. The would-be borrower’s job and income hadn’t changed.

The implications for property markets were severe, Mr Jovcevski said. “There are fewer qualified buyers,” Reduced borrowing power would drag down selling prices and eventually cut valuations.

“It’s a double whammy for those mortgage prisoners,” Mr Jovcevski said. “Their valuations come in lower so their equity may end up being less than 20 per cents so they have to pay lenders mortgage insurance again” if they refinance.

Australian Banking Association CEO Anna Bligh said banks had to make reasonable inquiries to satisfy APRA’s strengthened mortgage lending standards but she said the term ‘home loan prisoners’ does not represent the facts of a fiercely competitive home loan market where everyday banks are seeking to attract new customers.

Mozo’ Jovcevski said homeowners seeking to give themselves the best chance of successfully refinancing should reduce their expenses in the months prior to applying and ensure all bills have been paid on time.

Mark Hewitt — general manager of broker and residential at AFG which arranges 10,000 home loans a month — said would-be borrowers whose budgets were at breaking point or beyond could still get a loan if they had equity, a clean repayments history and the ability to ditch key expenses such as fees for private school if under the pump.

Some people seeking their first home loan are signing documents in which they promise to cut their spending if a new loan is approved.

“When you get a mortgage you make sacrifices — you continue some of your discretionary spending but not all of it,” said Brett Spencer, head of Opica Group, which sells software to brokers that works out how much a prospective customer can cut back.

A figure is agreed between the broker and the would-be borrower which is then provided to the bank, which would otherwise rely on the higher, raw expense figures.

This makes in interesting point, mortgage brokers will be diving into household expenses more than ever before, but of course, household saying they will cut their expenses to get a loan is not the same a clear cash flow.

Thus even in this tighter market, the industry is still trying to find ways to bend the affordability rules. And it’s worth remembering that according to the latest figures from APRA more than 5% of new loans currently being written are outside standard assessment criteria.

This suggests that even now; bank lending standards are still too lose.  All this points to more home prices falls ahead. This is reinforced by the latest Domain auction clearance rate data which was released yesterday, and shows that the final auction clearance rate last week in Sydney, Melbourne and Nationally ended up below 50% way lower on both volume and clearance rates than a year ago.

Yet despite all this, some are still sprooking the market, saying it’s a great time to buy. We do not agree.

U.S. Non-Bank Mortgage Lender Margins May Fall Further

U.S. non-bank mortgage lenders may face further margin pressure as interest rates continue to rise owing to higher funding costs relative to banks with lower-cost, stable depository funding, Fitch Ratings says.

Profitability metrics for non-bank mortgage lenders are generally weak, with expenses outstripping net revenues by approximately 21% across the five public non-bank mortgage companies for the 4.5-year period ending June 30, 2018.

We expect consolidation to continue as a result of weak profitability, with non-bank lenders seeking scale efficiencies to combat rising rates, persistently high technology and regulatory compliance costs, and declining refinancing activity. That said, non-bank lenders with multiple origination channels and established mortgage servicing platforms that generate higher fee income and more sustainable earnings should be better positioned for the shifting trends of the interest rate and economic cycles. These lenders are generally less exposed to cyclical swings in the mortgage market, as the complementary nature of origination and servicing businesses can serve as a natural hedge, reducing earnings volatility.

Aside from driving funding costs higher, Fitch also sees rising interest rates as a headwind to origination volumes, which could further pressure profitability in the medium term. Forecasts by the Mortgage Bankers Association (MBA) call for originations of $1.6 trillion annually from 2018-2020, down 6% from 2017 levels. Refinancings should drop to 24% of originations by 2020, down from 49% in 2016, in the face of rising rates, according the MBA.

Positively, mortgage servicing right (MSR) valuations generally increase with rising rates and economic growth, as prepayments fall and default risk lessens. Reflecting these dynamics, MSR valuations have increased in recent years, averaging 104bps of the unpaid principal balance of servicing portfolios for the five public non-bank mortgage companies.

Ratings assigned to non-bank mortgage servicers are typically in the ‘B’ to ‘BB’ rating categories, reflecting the highly cyclical and monoline nature of the business, valuation volatility associated with MSRs, elevated legislative and regulatory scrutiny, weak earnings profiles and reliance on short-term wholesale funding sources.

Westpac Net Interest Margins Take A Hit Of 11 Points

Westpac released their latest disclosures today the June 2018 Pillar 3 Report and provided an update on margins for the June quarter 2018. Its not pretty. Margins down, and mortgage delinquencies up.

 

The share price continues lower.

Westpac Banking Corporation has today announced that its net interest margin in June quarter 2018 (3Q18) was 2.06% compared to 2.17% in First Half 2018 (1H18). The 11bp decline mostly reflected higher funding costs and a lower contribution from the Group’s Treasury.

The primary source of higher funding costs has been the rise in short term wholesale funding costs as the bank bill swap rate (BBSW) increased sharply since February.

Westpac previously indicated that every 5bp movement in BBSW impacts the Group’s margins by around 1bp. Compared to 1H18, BBSW was on average 24bps higher in 3Q18. Accordingly, in 3Q18 this movement in BBSW reduced the Group’s net interest margin by 5bps.

The remaining 6bps margin decline in 3Q18 was attributable to:

  • 4bps from a reduced contribution from Group Treasury, principally from less opportunities in markets in 3Q18 compared to 1H18; and
  • 2bps from all other factors. These included ongoing changes in the mix of the mortgage portfolio (less interest only lending) along with lower rates on new mortgages. Deposit pricing changes only had a small impact on margins in 3Q18.

In Westpac’s June 2018 Pillar 3 report released today the Group reported a Common equity Tier 1 capital ratio of 10.4% at 30 June 2018. The ratio was lower than at 31 March 2018 as capital generated over the quarter was more than offset by determination of the First Half 2018 dividend.

Credit quality has continued to be sound with stressed assets to total committed exposures down 1bp from 31 March 2018 to 1.08%.

Mortgage 90+ day delinquencies in Australia were up 3bps over the three months ended June 2018 with most States recording some increase.

Mortgage 30+ day delinquencies were flat over 3Q18 while properties in possession were lower at just 392.

Unsecured consumer credit delinquencies rose.

The proportion of interest only loans has dropped from 50% in March 17 to 37% in June 18. This had a 2 basis point impoact on margins.

More than $8 billion of IO loans were refinanced to Principal and Interest in the 3Q18, with slightly more than half because they ended their term.

The Group has maintained strong liquidity metrics with the Net stable funding ratio of 112% and the Liquidity coverage ratio of 127%, both comfortably above regulatory minimums.

For the 10 months to 31 July 2018, the Group had raised $31bn in term wholesale funding at an average duration of over 6 years. This largely completes Westpac’s Full Year 2018 term funding requirements.

Pepper’s near prime settlements grow by more than 50%

Amidst the tighter lending conditions that have beset much of the mainstream banking industry, Pepper Money says it’s having its best year yet across its entire product suite, particularly in the near prime space, via MPA.

Since pioneering and launching the near prime segment in 2012, Pepper Money has experienced an average growth rate of 30% per year in near prime settlements and has served over 11,600 customers equating to more than $5bn-worth of loan settlements.

“To put the $5bn worth of near prime settlements into context, 56%, or $2.6bn, has been originated in the last 18 months,” Pepper Money CEO Australia Mario Rehayem said. “Near prime is finally getting the recognition it deserves.”

According to Rehayem, many near prime customers would have been financed willingly by a bank 12 months ago. These customers could be people who have a number of credit cards that they’re finding difficult to repay; people who participate in the gig economy; people who don’t hold full-time employment or maintain supplementary income; or people who have overcome a credit debt and want to move forward.

In an interview with MPA, Pepper Money director of sales Aaron Milburn said that interest from brokers working with near-prime borrowers continues to grow as traditional lenders tighten their lending criteria in all aspects of prime lending.

“It helps to think of the near prime category as an elastic band that expands and contracts depending on internal and external factors,” he said. “A bank’s changing risk appetite or an industry-wide regulatory change are good examples of these factors.”

How brokers can deal with near prime

The application process for a full-doc near prime loan is no different to a full-doc prime loan, according to Milburn. The challenge is managing their customer’s expectations.

Some customers may experience a sense of disappointment because they didn’t expect to be declined by a bank, so brokers need to be sensitive to those feelings, Milburn said.

Pepper Money has a five-step process that outlines how brokers can approach these situations and explain that they have an alternative solution that will still meet their client’s need.

For just the month of August, Pepper Money is offering a 50% discount on its mortgage risk fee– its equivalent of LMI— to celebrate its milestone in the near prime segment.

“It represents significant savings for those underserved families trying to refinance or get into the market at a time when the mainstream lenders are tightening their lending criteria more than ever before,” Milburn said.

This article was written in partnership with Pepper Money.

Brokerage settlements down 7% in “flat market”

Mortgage Choice saw its net profit after tax (NPAT) rise by an annualised 3.3% to $23.4m in FY2017, according to the firm’s latest financial results, released Tuesday, via Australian Broker.

The firm’s core broking business posted a cash NPAT of $22.75m, up 4% year-on-year. Its loan book at the end of June reached $54.6bn (a 2.3% growth), however, settlements – which reached $11.5bn –  were down 7%.

“[D]espite the strength of our brand and customer offering, settlements in FY2018 declined in a flat market and we are not growing our franchisee numbers,” Mortgage Choice CEO Susan Mitchell said.

“Through a thorough consultation process with franchisees it became very clear we needed a more competitive remuneration structure and needed to adjust the way we deliver our services, so that we can grow our network and market share,” Mitchell added.

In June, an investigation by Fairfax and ABC revealed many franchisees had been left finically worse off due to low commissions and unrealistic targets. Further, 170 – almost half the network – were considering legal action.

The CEO believes Mortgage Choice’s new hybrid broker remuneration model, introduced in July, will provide franchisees with higher pay and reduce their “income volatility”. She said this will enable them to invest in their businesses while attracting new, high quality brokers. Mitchell also revealed that more than 80% of broker franchisees have already adopted the new model.

This 2018, the firm invested $3.4 million in its new broker platform, which will enter pilot phase before its roll-out to franchisees by the next fiscal year.

“Our new broker platform was built by our in-house team of talented technology professionals to meet the specific requirements of the business and will enable our network to operate more efficiently while improving the overall customer experience,” said Mitchell.

Looking ahead, Mortgage Choice maintains a sound outlook for the mortgage broking industry amid a “complex lending environment” arising from an increase in wholesale funding costs, regulatory changes and tightening lending policies, as borrowers seek advice from qualified professionals.

“As we head into FY2019, we are confident the changes we have introduced will see us grow settlement volumes and market share over the medium to long-term. Having a greater share of revenue should enable our network to invest in their businesses while attracting new, high quality franchisees and loan writers to the network. At the same time, we continue to look at ways in which we can improve efficiencies,” said Mitchell.

“More than half of all home loans each year are originated by mortgage brokers, and I am confident borrowers will look to our well-known and trusted national brand for one of the best consumer propositions in the market,” she continued.

Broker group established to respond to regulators

From the Sedgewick report, to the Productivity Commission and ASIC’s investigations, brokers – particularly their remuneration – have been under fire from all corners; via Australian Broker.

Now, a cohort of industry execs have come together to help the industry unite through a dedicated forum.

The Mortgage Industry Forum (MIF), is backed by 16 founding members from Yellow Brick Road, Foster Finance, Mortgage Success, Shore Financial, ALIC, Intelligent Finance and Loan Market, among others.

Revealing the details during a National Finance Broker Day event in Sydney, YBR executive chairman Mark Bouris said, “This is important. It’s about time we reacted and there is something happening, that I’m involved in, and I would be happy for you to join us.”

Reiterating that MIF is “not against ASIC” or intending to become a competitor to the MFAA or FBAA, the group is intended to be “adjunctive to the Combined Industry Forum”.

Bouris continued, “The objective is to assess all the recommendations that are being made about us as an industry

“I paid for it, we meet every week or two and we cull through every recommendation that has been made by the CIF, Sedgewick, every recommendation from the Productivity Commission, ASIC and anybody else who matters,” he added.

MIF has written and submitted its own report to Treasury and the royal commission, which contains industry observations and recommendations from the broker perspective, with a heavy focus on protecting trail commissions.

Bouris explained, “We are trying to build a case for brokers so we, as a segment of the market can hand over …. a document to show how we should be regulated or managed around fee structures, our obligations, our transparency, training and compliance for the future. “

Next, a survey of broker input on the six CIF recommendations – available for all brokers to contribute towards through MIF’s Facebook page – will also be taken to key decision makers.

“We need to take to the government a document that will say, of the 17,000 brokers in this country, this many support all the recommendations. Otherwise all we have is people speaking for us, on our behalf, and that doesn’t work,” Bouris continued.

In addition to gauging sentiment, the group will also make practical suggestions as to how brokers can demonstrate the ongoing work they do in return for trail commission. Further, the group will also suggest new tools to support compliance and best practice.

Among the ideas floated, Bouris revealed an idea for a broker app that records client conversations and uploads them to a cloud accessible by ASIC, banks, aggregators and other key players in monitoring and compliance.

Adding that he believes the chances “right now are 50/50” that remuneration structures will change, Bouris said, “If 20% of our income is lost, the industry will collapse and if our industry doesn’t survive, the banks will just get stronger.”

He added, “We are the easy ones to target. We are fragmented. Banks have teamed up together and they have massive balance sheets and lobby groups, they are politically connected and they are the biggest tax payers in the country – so nobody is going to hurt them.

“If you don’t support the group and something happens that isn’t in your favour, you have only yourselves to blame. Something radical could happen – I’ve seen it happen in the past.”

NAB 3Q18 Update – Beware The Unknowns

NAB released their Q3 Trading update and capital report today. They said that cash earnings declined by 1%, and compared to the prior corresponding period were down 3% reflecting higher investment spend and credit impairment charges.

Their unaudited statutory net profit was $1.65 billion, and their CET1 ratio was 9.7%, which was down about 50 basis points from 1H18. The drop from 10.2% at March 2018, largely reflects the impact of the interim 2018 dividend declaration (63bps net of DRP) and seasonally stronger loan growth in the June quarter.

They expect to meet APRA’s ‘unquestionably strong’ target of 10.5% in an orderly manner by January 2020.

Their leverage ratio (APRA basis) was 5.3%, the liquidity Coverage Ratio (LCR) quarterly average was 132% and the Net Stable Funding Ratio (NSFR) was 113%.

While revenue was up 1% due to good growth in SME lending within Business & Private Banking and a strong contribution from New Zealand Banking, net interest margin declined slightly, reflecting elevated short term wholesale funding costs and ongoing intense home loan competition.

In addition, expenses rose 2% due to higher compliance costs, investment spend consistent with the accelerated strategy, and increased depreciation and amortisation.

Credit impairment charges rose 9% to $203 million and included $25 million of additional collective provisions for forward looking adjustments (FLAs), bringing the total balance of FLAs to $547 million.

They say asset quality remains sound with the ratio of 90+ days past due and gross impaired assets to gross loans and acceptances steady at 0.71%.

However, 90-Day past due residential mortgage loans stood at $2,015 million, at 30th June 2018, compared with $1,956 million in March 18, so delinquencies are rising. Impaired facilities also rose a little. $20 million of mortgages were written off in the quarter, compared with $10 million in the prior quarter.

They also warned of further provisions for “unresolved compliance issues” in the next quarter. No guidance on the quantum, so far.

They reported that their priority Segments Net Promoter Score (NPS) declined from -9 in March to -14 in June, partly reflecting an overall industry decline, with NAB’s priority segments NPS now second of the major banks.

ANZ Q318 Pillar Update Reveals Credit Tightening

ANZ released their latest update today, and it shows the benefit of returning to its core retail business in Australia, and the release of capital resulting from this. Provisions were significantly lower, thanks to a shirking institutional book, but the home lending sector past 90 days continues to rise to 0.63%, up 10 basis points from March 2016. This is pretty consistent across the industry, despite ultra-low interest rates.

In fact their disclosure on home loans was quite revealing, with lower system growth, a focus on owner occupied loans, and a reduction in mortgage power. This underscore the credit tightening is not temporary.
The Bills/OIS spread has remained elevated suggesting margin pressure is in the wind.

They said level 2 Common Equity Tier 1 (CET1) ratio was 11.07% at Jun-18, up 3bps from Mar-18 largely driven by: organic capital generation (+50bps) and receipt of reinsurance proceeds from the One Path Life (OPL) sale (+25bps); offset by the FY18 Interim Dividend (-59bps) and the share buyback (-8bps). 2018 interim DRP was neutralised.

The ¬$1.5bn of the announced $3bn on-market share buyback had been completed as at 30-Jun 2018.

Total Risk Weighted Assets decreased $2bn to $394bn driven by a $2bn reduction in CRWA. There was a $2bn reduction in CRWAs from net risk improvement across both Institutional and Retail businesses in Australia & New Zealand.

Total provision charge was $121m in 3Q18 with individual provision (IP) charge of $160m. The IP charge in 3Q18 was the lowest quarter since 2014, reflecting both the ongoing benign environment and improved quality of the portfolio

While typically Q1 and Q3 provision charges are lower than Q2 and Q4, 3Q18 was substantially lower than the average for the past four years, reflecting in part a high level of write backs and recoveries in the Institutional loan book.

ANZ has retained an overlay initially taken at 30 Sep 2017 in relation to the Retail Trade book which remains on watch.

Australian Residential Mortgage 90+ day past due loans (as a % of Residential Mortgage EAD) was flat vs prior quarter. There are some pockets of stress in the mortgage book, primarily in Western Australia, more particularly in Perth itself.

Throughout FY18 the Australian housing system has been characterised by slowing credit system growth, increased price competition, increased capital intensity and tighter credit conditions. As at end June 2018, YTD APRA System has grown 4.1%, down 18% vs. prior comparable period 5.3%.

ANZ’s ongoing focus is on the Owner Occupier Principal & Interest segment, with Owner Occupier loan growth of 4.4% annualised in the June quarter. Investor segment growth in the June quarter was -2.5% annualised.

ANZ’s total Australian home lending portfolio grew at 0.4 times system in the June quarter (2% annualised growth).

ANZ Interest Only home loan flows in the June quarter represented 13% of total home loan flows.

$6.5bn of Interest Only loans switched to Principal & Interest in the June quarter (3Q18), compared with $5.2bn in 2Q18,$5.7bn in 1Q18 and $5.6bn per quarter on average across FY17.

They show the expected rate of interest only loans peaking in the next year or so.

The combined impact of prudential responses over the past 3 financial years including various regulatory changes, together with subsequent policy changes by the banks, has been a meaningful reduction in the average maximum borrowing capacity for home loan borrowers. This suggests to us that there are higher risks in the back book, compared with new business being written now and confirms the reduction in “mortgage power” available to borrowers.

The Rise Of “Near Prime”

Following its expansion into the near-prime space, Bluestone, the non-bank lender has seen monthly application and settlement volumes double in less than six months, via Australian Broker.

July saw record applications and settlements for Bluestone in both Australia and New Zealand. The firm also reported a 96% increase in application volume and a 153% in settlements during the April-July period.

Near prime lending caters to borrowers who fall just short of qualifying for a prime loan. The firm sees massive opportunities in this as banks tightening lending criteria more and more borrowers, leaving more customers in this situation.

“It’s all well and good for us to move into near prime, but if we’re not keeping our DNA intact, that is, our high-touch service and the enthusiastic way we work with our brokers, it doesn’t hit the mark,” said Royden D’Vaz, Bluestone national head of sales and marketing.

“That’s why we’ve increased our staff numbers in our sales, lending and settlements teams to cater for the increased volumes, ” D’Vaz added.

In terms of market penetration, Bluestone notched a 55% increase in self-employed loans and a 115% increase in near prime loans for fiscal year 2017-2018.

“In addition to the growth in volumes, we have so many exciting things in the pipeline, with our team growing and a significant number of projects underway which will facilitate our growth into the future,” added Bluestone CEO, Campbell Smyth.

Bluestone’s move into near-prime follows its acquisition by U.S. private investment firm Cerberus Capital Management in February. The following month, Bluestone cut its interest rates by 75 to 105 basis points across its Crystal Blue products.

Estimating Future Home Lending Growth

One of my clients asked me to share my thoughts on the trajectory of future home loan growth, in the light of the current market dynamics. We run a series on this in our Core Market Model, and it is updated each time we get data from our surveys, APRA, ABS or RBA.

So I included the data from the ABS in terms of lending flows, factored in deep discounting and rate cuts from some lenders (like ANZ) and the ability of some lenders, like Macquarie, HSBC and some Credit Unions, to fly higher than the APRA imposed cap on investor loan growth.

In fact we run three scenarios, a base case, which we will discuss in a moment, an aggressive growth case, and a lower bounds case. We have assumed no move in the RBA cash rate over the next 18 months, a continued fall in the pressure on the BBSW rate, and some continued momentum from first time buyers.  We also factored in the ongoing shift from interest only loans to principal and interest loans, and appetite for finance from some household sectors, especially those seeking to refinance, including those seeking to assist their offspring to buy via the banks of Mum and Dad.  Our model has been tracking close to the RBA data in recent months, so we are pretty confident about the trends.  But it is only a projection, and it will be wrong!

The first chart shows the overall value of housing loan portfolios, split between owner occupied and investor loans. The astonishing momentum in investor lending up until mid 2017, when APRA’s new regulations kicked in, eases back, and the current growth in investor loans portfolios is pretty flat. In fact we expect a small rise in the months ahead, as some non-bank lenders have to compete harder with the APRA “approved” lenders who can go above the cap.  Remember though lenders still have tighter underwriting standards than before, so there is not going to be a massive resurgence in my view, at least until the Royal Commission reports.  Owner occupied loans will continue to lift, as first time buyers are still active, and attracted by the lower property prices.

Refinancing of existing loans does continue, though some are having difficulty finding a loan, as we discussed yesterday.

Turning to the percentage change, our base case is for a slow rise in investor lending and a slow fall in owner occupied loans, with an overall growth still well above inflation at between 5-6%.

This suggests that the lenders will need to compete hard for business which is available, continue with more rigorous loan assessments and manage tighter margins as a result.

As a result, we think property prices will continue to go lower through 2019, but does not as yet signal a crash.

This could all change if funding costs go higher, or the banks get slugged with more costs relating to poor practice, or even face criminal cases relating to charging fees for no service, or making unsuitable loans to borrowers.

As a result there is significantly more downside risk than upside gain at the moment.  Our worst case scenario actually sees the overall lending portfolio shrink. If this were to happen, then all bets are off, and we must expect significantly more property price falls through 2019. Actually we do not think, as some are saying, that the worst is over. Rather its just the end of the beginning!