Non-majors gaining ground on big banks

The Australian Finance Group’s (AFG) Mortgage Index has revealed that the share of owner-occupied loans submitted to non-majors by AFG brokers increased from 21.8 per cent in the third quarter of 2013 to 36.7 per cent in the same quarter this year.

The share of investment loans written to this segment also rose in the same period, increasing by 14.8 per cent from 20.0 per cent to 34.8 per cent.

Non-majors also grew their share of the first home buyer market, from 22.9 per cent in 2013 to 32.4 per cent in 2018.

AFG CEO David Bailey warned that any attempts to undermine the broking industry could therefore skew competition among lenders by reversing inroads made by non-majors following “anti-competitive” government interventions during the global financial crisis (GFC).

“It has taken a decade to drive competition back to the levels evident before the global financial crisis. During the GFC, the government of the time backed the majors, allowed anti-competitive takeovers and crippled competition,” Mr Bailey said.

“Non-bank lenders saw their market share reduce from 20.3 per cent in the second quarter of 2007 to just 7.5 per cent in the first quarter of 2009. Is that what we want to see again?”

He continued: “If mortgage brokers are taken out of the equation, the non-majors and any semblance of competition will be decimated,” the AFG CEO added.

“The loss of tens of thousands of jobs in small business across the country won’t be the only price paid. Make no mistake, the losers will be every single mortgage holder in this country.” 

The AFG index also revealed a 1.8 per cent drop in lodgements when comparing the third quarter of 2018 to the same period in 2017.

Mr Bailey, however, said that he wasn’t surprised by the “softening”, attributing the decline to changes in dwelling values.

“Given the timing of public holidays and suggestions that Sydney house prices are coming off a little, the fact that there does not seem to be any growth is not surprising,” the CEO said. “The only market in the country which appears to be generating ongoing growth is Victoria.” 

Despite recent softening, the total value of lodgements increased from $8.3 billion in Q3 2013 to $13.9 billion in Q3 2018. The average loan size has also grown from $392,407 to $499,608. 

Further, the data revealed a 32 per cent fall in interest-only home loans written by AFG brokers over the past five years, from 52 per cent in the third quarter of 2013 to 20 per cent in the same quarter in 2018. 

“With some lenders indicating they again have an appetite for this type of lending, we would probably call this the bottom for this segment of the market,” Mr Bailey noted. 

The share of fixed rate loans lodged in the same period increased from 18.3 per cent to 19.6 per cent, while the number of standard variable loans lodged dropped from 66.7 per cent to 64.9 per cent.

[Related: Big banks expand owner-occupied loan book]