AFG volumes propelled by market tailwinds

The improvement was mostly driven by spikes in home lending activity across Australia’s east coast, led by NSW, where lodgements were up 16 per cent from the previous corresponding period, followed by Victoria and Queensland (10 per cent).

Lodgements also increased in South Australia and Western Australia when compared with 1Q19, albeit less pronounced, rising by 5 per cent and 4 per cent, respectively.

Speaking to The Adviser, AFG CEO David Bailey attributed the spike in mortgage lodgements to tailwinds in the lending landscape, making specific reference to recent rate cuts and the Australian Prudential Regulation Authority’s (APRA) new lending guidance.  

“It's a combination of the Reserve Bank's changes in terms of rates, but also the floor on the serviceability calculations recommended by APRA,” he said.

“I also think that there's probably been a rise in sentiment in the Australian property market, [reflected] in the nation's press as well, [particularly with regard] to the view that [prices] may have bottomed out.

“That's creating a level of enquiry and activity amongst customers who are thinking, with clear air post-election around the housing market, and the view that maybe the housing market has bottomed, that it's time to get in again, or at the very least check the rates that they're being offered by their current provider.”

Mr Bailey said he was pleased with the result, particularly after a prolonged period of subdued market activity, with AFG reporting a $4.1-billion (11 per cent) fall in home loan settlements via its broker distribution network over FY19, down from $35.3 billion in FY18 to $31.2 billion.

“I think the growth number was on the positive side of expectations, but I also think the market has been soft for a period of time so it's actually nice to be pleasantly surprised,” Mr Bailey said.

The AFG CEO added that it’s too early to know if the 1Q20 result will be replicated in the coming quarters.

“It's difficult to say but certainly the conversations we've been having with brokers in the market generally is that the level of activity and optimism in the market remains high,” he said.

“I'm hopeful that this is not just a blip and is more of a sustained return to normal growth.”

AFG’s 1Q20 performance reflects the broader improvement in home lending activity over the past quarter, with the Australian Bureau of Statistics’ (ABS) latest lending to households and businesses data revealing that the value of home loan approvals increased by 5.1 per cent (seasonally adjusted terms) in July – the largest monthly increase since March 2015.

Mortgage Choice CEO Susan Mitchell has also previously noted that the broking group has observed a pick-up in home lending activity.   

“We have seen our loan applications rise significantly since June 30. I think everyone has seen that,” she said.

“The feedback I’ve gotten from the banks is that they are as busy as they’ve ever been.”

AFG’s ASX updated also revealed that approximately 45 per cent of loans written by AFG brokers over the 1Q20 were lodged with non-major lenders, up from just over 40 per cent in 1Q19.

The average loan size also increased, rising from just under $510,000 to just over $530,000.

[Related: Lender reports 70% growth in broker loans]