According to new ABS data the non-bank lenders’ market share dropped from 2.7 per cent to 1.2 per cent of Australian mortgages in the last quarter.
In the same period, banks’ share of the $1.2 trillion mortgage market climbed to 91.5 per cent in March, up from 89 per cent in December 2010.
Speaking about the results, MFAA chief executive Phil Naylor said non-banks were synonymous with bringing competition and lower rates to the mortgage market in the late 1990s, through lenders such as Aussie and Wizard.
They peaked with a market share of 15.2 per cent in 2003, having taken business from the banks, which by 2003 had a share of just 76.9 per cent.
“They found ways to lower their interest rates and create incentives for home buyers to borrow from them. Mortgage margins across the entire market decreased with the influence of lenders like Aussie and Wizard. To see the non-banks falling to almost one per cent of market share, is worrying from a competition point of view.”
Mr Naylor said global financial problems associated with the GFC had curtailed the non-banks’ funding model, leaving home lending to institutions that took deposits.
But despite the recent hardships, the outlook is still bright for the non-bank sector.
FAST's chief executive officer Steve Kane told The Adviser that funding and competition would return to the market.
"We are already starting to see funding filter back into the market. Obviously it will take time for the non-bank sector to recover. We can't just flip a switch and see non-bank market share bounce back to 15 per cent. But it will happen. Funding mechanisms are slowly coming back into play so we will see more non-bank products come back to the fore," he said.