Brokers are increasingly turning away from the major banks, new aggregator data shows, with a record proportion of loans going to the non-major lenders.
The latest AFG Mortgage Index, which covers the second quarter of FY19 (ending December 2018), demonstrates that brokers are increasing competition in the home loan market by distributing mortgages through different lender segments.
According to the latest Mortgage Index, the proportion of loans sent to non-major lenders for the period hitched up to 42.1 per cent in the final quarter of the calendar year (up 1.8 per cent on the previous quarter), the highest proportion ever recorded by AFG brokers.
The non-majors saw market share gains recorded for refinancers (now 46.8 per cent), upgraders (42 per cent), first home buyers (32.1 per cent) and investors (43.4 per cent).
Likewise, the proportion of loans sent to the big four banks dropped to its lowest recorded proportion, falling to 57.9 per cent.
This marks a notable drop in the number of loans being sent to the major banks – with the prior comparative period being 6.2 percentage points higher (at 64.1 per cent) and the prior quarter being nearly 2 percentage points higher (at 59.7 per cent).
Speaking of the figures, AFG CEO David Bailey said: “AFG now has more than 50 lenders on our panel and in clear evidence of the vital role mortgage brokers play in delivering a competitive home loan market, non-major lenders’ market share is at a record high of 42.1 per cent.
“The non-majors are becoming an increasingly important part of the assistance brokers provide to customers.”
The index also demonstrated the impacts that reduced risk appetite has had on the lending landscape – with home lending applications for the final quarter of 2018 dropped 8 per cent on the prior quarter to $13 billion.
Lodgement volumes dropped in every state but were most marked in Sydney and Melbourne, where volumes fell by $5.5 million and $4.0 million, respectively.
Mr Bailey commented: “Although overall volumes are down, our brokers still lodged over 25,000 applications for borrowers during the quarter.
“This is a fraction of the number of consumers they help with post-settlement and ongoing reviews and support,” he noted.
As the industry prepares for next month’s release of the financial services royal commission’s final report, Mr Bailey said that the latest index confirmed the crucial role played by mortgage brokers in creating a competitive home loan market.
“Politicians and policy makers should not lose sight of the enormous value Australian consumers place in the services that these small businesses provide.
“We are yet to see the final report from the banking royal commission, but we remain concerned that some of the testimony we witnessed was clearly aimed at driving consumers back into the big bank branches,” he said.
“Any recommendations flowing from that skewed view that would marginalise the mortgage broking industry would result in a very poor outcome for the economy and hurt the very consumers the commission was aiming to protect.”
He concluded: “As an industry that relies on customer recommendations, [these] figures demonstrate that consumers are overwhelmingly satisfied with both the service provided by mortgage brokers and the real benefits of competition that we deliver.
“Consumers won’t want to lose those benefits as part of the industry response to the royal commission.”
[Related: Broker market share hits record high]
Annie Kane is the editor of The Adviser and Mortgage Business.
As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts.
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