Speaking upon the announcement of Westpac’s 2018 full-year results on Monday, the CEO outlined the bank’s future outlook on the conditions of the housing market.

“We expect house prices to cool further, and investor demand to remain weak. On the other hand, demand from first home buyers is holding up. These dynamics are likely to lead to housing credit growth easing to 4 per cent next year, with total credit growth of 3.5 per cent,” he said.

“With around 70 per cent of Australian customers ahead on their repayments and delinquencies low, credit risks in the housing market currently remain low.”

According to Fairfax Media, Mr Hartzer asserted during his presentation that Westpac did not expect “a big drop in house prices”, despite his prior projections.

His statements come as the nation’s second largest bank reported flat full-year cash earnings of $8.07 billion, and cited customer refunds, difficult operating circumstances and higher funding costs as responsible for the lack of profit growth.

In its full-year report, Westpac’s Australian home loans were just under system growth, increasing by 4 per cent to $17.6 billion.

Investor property loans increased by 2 per cent, while owner-occupier lending grew by 6 per cent.

Principal and interest loans now comprise 61 per cent of the portfolio and represented 77 per cent of new flows. This is up from last year, with such loans accounting for 50 per cent of the portfolio.

Westpac suggested that the decrease in mortgage spread was attributed to customers changing from interest only to principal and interest loans, with such switches totalling $15.9 billion of interest only loans in the second half of the year, and changes in the make up of portfolios towards lower rates on new mortgages and lower margin products.