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Analysis: How big are the non-bank lenders?

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Analysis: How big are the non-bank lenders?

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James Mitchell 2 minute read

With limited information available about the size and market share of Australia’s non-ADI mortgage sector, The Adviser did some digging to identify some interesting trends about the flow of owner-occupied mortgages.

ABS data for the value of bank and non-bank mortgage lending to owner-occupiers goes back as far as 1975. In October of that year, non-banks accounted for $230 million of home loans financed, more than the banks with $219 million. At that time, the non-banks made up more than half of the market.

But by December the tables had turned. Banks accounted for $239 million and the non-banks provided $211 million.

Almost a decade on and the banks were collectively writing half a billion dollars in owner-occupied mortgages each month, with flows rising rapidly. In January 1984, the banks originated $504 million in mortgages. By December, they were writing $650 million. Meanwhile, the non-banks were trailing with $396 million.

In October 1987, the same month as Black Monday, the Australian banks cracked a billion dollars a month in mortgage approvals for the first time on record. The non-banks, by comparison, wrote just $319 million.

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In fact, the non-banks didn’t hit the billion-dollar milestone until September 1999 ($1.04 billion), by which point the banks were writing around $5 billion a month.

By the end of the century, the non-bank lenders had about 20 per cent of the owner-occupied mortgage market. Throughout the 2000s, they consistently wrote around $2.7 billion a month, before hitting the high-water mark of $3.2 billion in June 2007. By comparison, the banks wrote $12.7 billion that month.

By June 2008, non-bank lending had come off the boil by 59 per cent to $1.3 billion and bank lending was down by 15 per cent for the year.

The ABS figures show that the impact of the GFC was catastrophic for the non-bank lenders. The rock bottom can be recorded at September 2011, when just $790 million was originated by the non-ADIs (compared to $12.4 billion by the banks).

The sector didn’t see billion-dollar monthly approvals again until July 2013 and they haven’t cracked $2 billion a month since the beginning of 2008.

The latest housing finance figures for March 2018 show the number of owner-occupied mortgages financed by the non-banks was $1.4 billion. The banks wrote $19.6 billion. The total value of all owner-occupied mortgage financing in March was $21.2 billion.

What these figures show is that, according to the ABS data, non-bank lending currently accounts for around 6.6 per cent of total home lending to owner-occupiers.

Analysis: How big are the non-bank lenders?
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James Mitchell

James Mitchell

James Mitchell has over eight years’ experience as a financial reporter and is the editor of Wealth and Wellness at Momentum Media.

He has a sound pedigree to cover the business of mortgages and the converging financial services sector having reported for leading finance titles InvestorDaily, InvestorWeekly, Accountants Daily, ifa, Mortgage Business, Residential Property Manager, Real Estate Business, SMSF Adviser, Smart Property Investment, and The Adviser.

He has also been published in The Daily Telegraph and contributed online to FST Media and Mergermarket, part of the Financial Times Group.

James holds a BA (Hons) in English Literature and an MA in Journalism.

 

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