The Australian Finance Group (AFG) has released its latest mortgage and competition index, which involves a survey of its network of 3,000 brokers over the three months to 31 March 2020.
The index has revealed that the major banks grew their share of home loan lodgements from 53.1 per cent in the December quarter to a two-year high of 59.6 per cent.
In value terms, AFG brokers lodged approximately $8.8 billion in loans with the big four banks and their subsidiaries.
Westpac Group (includes St.George Bank, Bank of Melbourne and BankSA) drove most of the improvement in major bank volumes, with its share of broker lodgements climbing from 16.3 per cent to 20.2 per cent.
ANZ and NAB’s share of lodgements also increased, rising to 9.9 per cent (up from 9.5 per cent) and 8.9 per cent (up from 8.5 per cent), respectively.
A slight decline in the Commonwealth Bank of Australia’s (CBA) share of broker lodgements, from 14.8 per cent to 14.7 per cent, was offset by an increase in its subsidiary Bankwest’s share, from 5.4 per cent to 5.7 per cent.
According to AFG CEO David Bailey, the big four banks have been better equipped to manage margin pressures from low interest rates, enabling them to outmuscle non-major competitors.
“As interest rates dropped, the major lenders saw their opportunity,” he said.
“The strength of their balance sheets, supported by their competitive funding advantage and fixed-rate offerings, has enabled them to take back some ground lost to the non-major lenders in recent times.
“All four of the major banks have been actively pursuing market share with cashback offers to customers, and it has had the desired effect, with increasing numbers of borrowers choosing from the big four stable of brands.”
Of the non-major lenders, Macquarie Bank was hit hardest by the big four’s rally over the March quarter, with its share of broker lodgements slipping for the second consecutive quarter to 8.7 per cent (down from 11.3 per cent), following four quarters of steady growth.
Citibank and ING also lost considerable ground over the March quarter, with their shares of lodgements falling to 0.3 per cent (down from 1.9 per cent) and 2.4 per cent (down from 3.4 per cent), respectively.
Suncorp Bank recorded the sharpest increase in broker share among the non-majors, up from 2.1 per cent to 2.4 per cent.
Overall lodgements jump ahead of slump
The AFG index reported that approximately $15.4 billion in loans (29,344 applications) were lodged by brokers in the March quarter, up from $15.3 billion (28,611 applications) in the previous quarter, and from $11.6 billion (23,036 applications) in the previous corresponding period.
The vast majority of loans were lodged in the back end of the March quarter, which Mr Bailey attributed to a “flood of activity” in response to interest rate reductions.
According to Mr Bailey, brokers were helping borrowers “shore up their positions against the impacts of COVID-19” and amid a “rush to complete transactions as shutdowns loomed”.
In the month of March alone, AFG brokers lodged $6.15 billion in loans (11,196 applications), partly driven by a spike in refinance activity, from 27 per cent of lodgements in February to 33 per cent in March.
However, analysts are expecting lending volumes to fall over the coming months, with the coronavirus outbreak arresting economic activity.
Job uncertainty and new restrictions on real estate activities are expected to hinder demand for housing credit.
Growing credit quality concerns have also prompted several lenders, particularly non-banks, to adjust their risk appetites, imposing restrictions on borrowers employed in high-risk industries.
Mortgage insurer QBE Australia has also imposed an “embargo” on the provision of lender’s mortgage industries to such borrowers.