The number of broker-originated loans lodged with non-major lenders has increased to a record high, partly driven by a historic shift in first home buyer activity.
According to the Australian Finance Group’s (AFG) latest quarterly index – which is based off data collected by the aggregator’s network of 3,000 brokers – non-major market share increased to a record high of 42.3 per cent in the three months to 30 June 2019, up from 41.4 per cent in the previous quarter and 40.8 per cent in the same quarter last year.
The rise in the non-majors’ share of the mortgage market coincided with a shift in the preferences of first home buyers (FHB), fewer of which sought finance from a big four bank.
In the June quarter, AFG brokers lodged 34.6 per cent of FHB loans to non-majors, up from 31.7 per cent in the previous quarter and 31.6 per cent in the June quarter of 2018.
Non-majors also received a larger share of volume from the interest-only segment, with brokers lodging 44.5 per cent of interest-only loans to non-majors in the June quarter, up from 39.8 per cent in the previous quarter and 40.5 per cent in the same quarter last year.
An increasing number of refinancing applications also flowed through to non-majors (48.4 per cent), up from 47 per cent in the March quarter and from 45.9 per cent in three months to 30 June 2018.
Macquarie, AFGHL outpace ANZ and NAB
The AFG index also revealed that over the 12 months to 30 June 2019, brokers lodged more home loans with non-major lenders Macquarie (9.7 per cent) and AFG Home Loans (8.8 per cent) than with ANZ (8.5 per cent) or NAB (7.3 per cent).
Macquarie and AFGHL also outpaced Westpac (7.8 per cent) when excluding volume lodged to its subsidiaries, Bank of Melbourne (2.6 per cent), BankSA (0.6 per cent) and St George Bank (3.9 per cent).
The Commonwealth Bank of Australia (CBA) continued to boast the largest share of volume, which increased to 17.7 per cent, up from 16.1 per cent in the 12 months to 31 March 2019.
When including volumes lodged to its subsidiary Bankwest (7.4 per cent), CBA’s share increased to over a quarter of the market (25.1 per cent).
Mortgage volumes recover but still weak
According to the index, the total value of home loans lodged by AFG brokers increased by 12 per cent on the previous quarter, rising by approximately $1.4 billion, from $11.6 billion to $13 billion.
However, when compared to the same quarter last year, the value of overall lodgements was down 11 per cent ($1.5 billion), from $14.5 billion.
Reflecting on the data, AFG CEO David Bailey said the quarterly spike in the value of lodgements may be a sign of a recovery in demand for credit.
“There are tentative signs of increased activity with both lodgement numbers and volumes up significantly for the quarter,” Mr Bailey said.
“It will be important to see the impact of recent moves by the RBA, but we remain cautiously optimistic.”
AFG also reported that despite the decline in home values over the past few years, the average mortgage size has continued to increase, rising to $515,000 as at 30 June, with South Australia the only state to record a drop ($402,473).
The share of investment home loans also increased over the quarter to 28 per cent, back to the level recorded in the June quarter of 2018.
“With investor lending up, it is interesting to also note the major banks’ responses to the recent cash rate reductions where investor loan rates have seen larger rate cuts passed on to customers,” he said.
“With those APRA-related restrictions now lifted, this could signal a new battleground for customers.”
The AFG CEO also noted the rise in fixed rate demand, stating that borrowers may increasingly look to lock in fixed rates to capitalise on the low rate environment.
“With the RBA moving to reduce the cash rate twice recently, it will be interesting to watch the market and see if people are calling the bottom and choosing a fixed rate product,” he said.
“Again, the non-major lenders seem to be in the hunt. Almost 37 per cent of customers choosing a fixed rate loan were doing so with a non-major lender. This is a high for the year – this number in March 2019 was only 20 per cent.
“Of the fixed rate loan providers in the market, the Westpac house of brands provide one in every four fixed rate loans, which incredibly is down from nearly 38 per cent in April.”
[Related: Non-majors lower mortgage rates]