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.
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.