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FHBs an outlier amid lending slump

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Charbel Kadib 5 minute read

Lending volumes are in a “holding pattern”, with first home buyers the only borrower segment to report a rise over the first quarter of 2019, according to AFG.

The Australian Finance Group’s latest Mortgage Index has revealed that overall lending volumes through the aggregator’s broker network dropped over the first quarter of 2019 (1Q19), from 28,883 ($14.5 billion) loans lodged in 4Q18 to 27,900 ($14.2 billion), and fell from 30,471 ($14.9 billion) when compared to 1Q18.

Commenting on the results, AFG CEO David Bailey attributed the decline in loan volumes to a lull in market sentiment off the back of the financial services royal commission.

“As the financial services royal commission continues to rattle the market, Australian home buyers are feeling the pinch as lenders tighten their borrowing criteria,” Mr Bailey said.


“Compared to the same quarter last year, lending volumes are down by just under 5 per cent — a sure sign of a tightening market.”

AFG also reported that, over 1Q19, loan volumes for investors declined by 1 per cent to 27 per cent of loans processed, with refinance and upgrader volumes remaining stable at 23 per cent and 43 per cent, respectively.

First home buyers (FHBS) were the only borrower segment to report an increase in loan volumes, from 13 per cent in 4Q18 to 14 per cent in 1Q19.

Further, one a state-by-state basis, the aggregator reported that lending volumes declined in Victoria (6 per cent), New South Wales (2.5 per cent) and Queensland (2 per cent).

Conversely, volumes increased in the Northern Territory (22 per cent), Western Australia (6 per cent) and South Australia (2 per cent).


Additionally, AFG reported an increase in the national average loan size to $509,736, led by a 3 per cent rise in NSW, which Mr Bailey attributed to a drop in apartment sales and a tightening in credit conditions.  

The AFG CEO also noted the rise in demand for fixed rates, spurred by out-of-cycle interest rate hikes, with demand for fixed rates rising to 18.9 per cent, and variable rates slipping to 64.3 per cent.

“With the recent round of rate rises flowing through, many consumers have been speaking with their brokers to discuss the value of fixing all or part of their loans,” the CEO said.

Moreover, the AFG data found that the major banks’ market share during the first quarter of the new financial year increased to 59.8 per cent from 58.2 per cent, while non-major market share declined from 40.8 per cent to 40.2 per cent.

However, Mr Bailey noted that the major banks’ market share remains well below the long-term average.

Reflecting on the overall data, Mr Bailey concluded: “This is further evidence of the value brokers deliver to competition in the Australian lending market.

“Refinancers (55.5 per cent) and upgraders (60.5 per cent) are favouring the competitive offers available from the non-major lenders.”

[Related: Home loan approvals continue slipping]

FHBs an outlier amid lending slump
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Charbel Kadib

Charbel Kadib

Charbel Kadib is the news editor on The Adviser and Mortgage Business.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

Email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.


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