Major banks' market share under threat

Regional and foreign banks have seen their overall share of the mortgage market decline since 2008 as borrowers sought the perceived safety of bigger lenders, backed by the government guarantee at the height of the GFC.

But as funding costs have leveled and liquidity has returned to the market the smaller lenders have looked to capitalise on opportunities to compete with the bigger institutions.

Speaking to The Adviser,RFi director Alan Shields said Australia’s non-majors have definitely lifted their game in the past few months.

“While we aren’t seeing them steal market share away from the majors just yet, we are definitely seeing them employ a lot of aggressive price and policy strategies,” he said.

“I think the sector’s enhanced aggression will ultimately lead to greater market share.”

Mr Shields said as growth in the mortgage market is currently sluggish, Australia’s lenders are forced to be more aggressive in order to steal business away from their competitors.

And it seems the non-majors’ aggressive stance is already paying dividends, with the lenders drumming up support in the third party distribution channel.

Vow Financial’s chief executive Tim Brown said brokers and their clients are now, more than ever, looking for greater choice that stretches beyond the traditional financing options.

“Over the past few months we have definitely noticed a movement towards the non-major banks and other smaller and more innovative financial institutions, with 32 per cent of our business now being done outside CBA, ANZ, Westpac and NAB,” Mr Brown said.

Rate Detective’s Warren Dworcan said Mr Brown’s comments were unsurprising given that the non-majors have been competing strongly in the mortgage space for the past few months.

“I can say the second tier is doing a job at trying to compete in a competitive market. They are looking at innovative ways to enhance the way they interact with the broker channel. In addition, they are enhancing their own products and policy in a bid to improve their own lending situation,” he told The Adviser.

“Borrowers are in a really good position at the moment. There is a lot of competition out there, which is helping them find a great financial solution.”

Speaking to The Adviser earlier this month AFG's NSW state manager Chris Slater said Suncorp Bank, Citibank, ING DIRECT and AMP Bank had all dramatically increased their volumes over the past month.

“Macquarie has literally doubled their volumes with us over the past month. Similarly, Suncorp’s numbers are now really strong as are AMP’s,” he said.

“Citibank has had a really strong couple of months also.”