Non-majors hold lead on pricing as rates rise: Broker Pulse

The survey of 245 brokers, which was conducted between 9–18 January 2023 to quantify the lending experiences of brokers over December 2022, found that 76 per cent of brokers said “product pricing” was the primary reason they recommended non-major banks to their clients.

Conversely, only 20 per cent of brokers cited product pricing as their primary reason for recommending non-banks (down from 31 per cent in November 2022) while 40 per cent said this was the driving factor for them using majors (down from 43 per cent).

Product pricing has been growing in importance recently, after the Reserve Bank of Australia’s (RBA) decision to hike rates for the eighth consecutive month in December took the official cash rate to 3.10 per cent.

While the banks had been quick to lift variable home loan rates by 0.25 per cent (in accordance with the cash rate increase), the non-majors continue to be favoured for their pricing.

Non-majors widely used by brokers

Given the competition around pricing, it’s perhaps unsurprising that broker usage of the non-major lenders also spiked in December 2022, reaching a near-record high of 89 per cent, just shy of the record 91 per cent set in November 2021.

More brokers were also using major banks in December 2022 (78 per cent compared to the previous month’s figure of 74 per cent) while fewer were using non-banks (47 per cent, down from 49 per cent in November 2022).

Client circumstances continued to dominate as the primary reason for brokers choosing both the major banks and non-banks in December 2022.

While 68 per cent of brokers recommended a major bank to their clients due to their circumstances at the end of last year (down from 72 per cent in November 2022), 77 per cent chose the non-banks for this reason.

Only 15 per cent recommended non-banks to clients due to their turnaround times in December 2022 (down 12 percentage points from the previous month) while a quarter of all brokers surveyed used a major bank and 43 per cent used a non-major bank.

How the lenders performed

The Commonwealth Bank of Australia (CBA) dethroned Macquarie Bank to become the most commonly used lender in December 2022, with 44 per cent of brokers saying they submitted applications to the major bank that month, up from 39 per cent in November 2022.

While Macquarie Bank slipped to second position in December 2022, a greater proportion of brokers said they used the non-major bank compared to the previous month (43 per cent compared to 40 per cent in November).

Usage of St.George Bank was up by 9 percentage points from the previous month with 34 per cent of brokers stating they used the lender in December 2022. As a result, the lender climbed from sixth to fourth most popular lender in December.

Commenting on the trends, Momentum Intelligence director, Michael Johnson, said: “In this evolving interest rate environment, brokers are looking for the best deal that suits their [clients’] needs.

“We’re seeing a lot of competition from lenders while they look to capture broker market share.”

The Broker Pulse results came amid record levels of refinancing.

According to the Australian Bureau of Statistics, external refinancing reached a new record high in November 2022, with more than $19.5 billion of loans changing lenders.

As rates continue to rise (with many forecasting the central bank to hitch rates up again in February), the mortgage refinancing boom is also expected to remain strong.

Indeed, a Mortgage Choice survey found that around one-third of mortgagors are considering refinancing this year.

To find out more about the Broker Pulse survey and participate in future surveys, visit the Broker Pulse survey website.

[Related: Brokers reveal borrowers’ top rising-rate questions — and why]