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Home loan competition heats up as switching rates bounce

The rate of borrowers refinancing their mortgage with another lender has increased for the fifth consecutive month, new ABS statistics have revealed.

The Australian Bureau of Statistics (ABS) has revamped its Lending indicators data, sourced from the Economic and Financial Statistics (EFS) collection.     

The ABS reported a 2 per cent increase in the value of new housing finance commitments in October (seasonally adjusted terms), up from $17.8 billion to $18.2 billion.

The increase was driven by a 2.2 per cent rise in the value of new owner-occupied commitments, from $12.8 billion to $13.1 billion.

The value of new investor commitments also increased, up 1.4 per cent, from $5 billion to $5.1 billion.


The ABS also reported a rise in first home buyer (FHB) activity, with the number of new FHB owner-occupied loans rising 1.4 per cent in October, making up 29.9 per cent of all new owner-occupied loans.

Reflecting on the research, Tim Reardon, chief economist at the Housing Industry Association, attributed the rise in home loan volumes to recent developments in the market, which include rate reductions, changes to lending guidance, and public policy initiatives.

“Stimulus measures, including interest rate cuts, tax cuts and the easing of APRA’s lending restrictions, are having a positive impact on the housing market,” he said.

“The government’s First Home Loan Deposit Scheme will also assist eligible first home buyers to enter the market from January.

“If these conditions remain, the market will stabilise during 2020, at levels well below those experienced in recent years.”

Switching rates bounce

Moreover, the data reflects strong competition in the mortgage market, with the rate of home loan switching increasing across both the owner-occupied and investor segments.

According to the ABS figures, the number of owner-occupiers refinancing their loan with another lender (external refinancers) increased by 4.1 per cent (original series data) in October to 15,437, following on from a 2.6 per cent increase in September.

This marks the fifth consecutive month in which the number of external refinancers from owner-occupiers increased.  

Across the investor space, the number of external refinancers increased by 8 per cent in October, up from 8,283 to 8,950. This followed on from a 4.5 per cent increase in September.

The rise in mortgage market competition has been reflected in the financial results of the major banks, with the big four attributing declines in home loan volumes to a loss of competitiveness.

Last month, NAB chair Philip Chronican told the House of Representatives standing committee on economics that the decline in the market share of the big four banks over the past years was in response to “intense” competition. 

“The major banks, I think, were lending 80 per cent of all home lending only a matter of a few years ago and are now lending something like less than 60 per cent,” he said.

“That tells me that the competitiveness in the consumer lending sector is intense, and we need to sharpen our act and get more of it.”

 [Related: ‘We need more of it’: NAB rues loss of mortgage market share]

Home loan competition heats up as switching rates bounce
Home loan competition

Charbel Kadib

Charbel Kadib is the news editor on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel completed internships with public relations agency Fifty Acres, and the Department of Communications and the Arts.

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

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