Investors record mortgage wins, non-major lenders surge in popularity

“With those APRA-related restrictions now lifted, this could signal a new battleground for customers,” said Mr Bailey. 

“With investor lending up, it is interesting to also note the banks’ responses to the recent cash rate reductions where investor loan rates have seen larger rate cuts passed on to customers.”

Mr Bailey’s comments follow the release of the latest AFG index, which found the first glimpses of a recovery in the Australian home loan market, with mortgage lodgements producing an actual increase for the first time in a year.

The AFG Index recorded more than $13 billion in lodgements in the three months to June 30, representing a 12 per cent increase on the last quarter.

Mr Bailey said non-major lenders are driving much of this renewed activity.

“[They are] responsible for a record-high 42 per cent of lodgements and for the first time accounting for more than one in every three mortgages for first home buyers,” he said. 

The index also found that despite last quarter’s turnaround, the numbers remain 11 per cent down on the same time last year.

But Mr Bailey still believes there is cause to be optimistic.

“There are tentative signs of increased activity with both lodgement numbers and volumes up significantly for the quarter. It will be important to see the impact of recent moves by the RBA but we remain cautiously optimistic.”

All-time highs

Mr Bailey added that the average mortgage size is now at an all-time high of almost $515,000.

“After a period of slow growth, refinancers have lifted to 28 per cent, but this is still a long way from the activity seen in 2016 when they recorded levels as high as 39 per cent. Home owners looking to upgrade have dropped back to the same level they were at in the final quarter of 2017.

“The first home buyer segment of the market has been consistent with recent quarters to be sitting at 14 per cent. The split of where these customers are going to obtain finance for their first home has shifted further towards the non-majors. In the fourth quarter, a record 35 per cent of all first home buyer lodgements went to the non-majors, which is the highest split since 33 per cent was recorded way back in quarter 2 2015.”

Mr Bailey also said the non-majors are writing close to 45 per cent of all interest-only home loans – a “significant jump” on last quarter.

“The combined impact of the interest-only and first home buyer uplifts has seen the non-majors’ market share reach a record high, at 42.3 per cent.”

He said the impact of the double cash rate cuts on fixed rates is worth keeping an eye on.

“Again, the non-major lenders seem to be in the hunt. Almost 37 per cent of customers choosing a fixed rate loan were doing so with a non-major lender. This is a high for the year – this number in March 2019 was only 20 per cent.”

The index found that for the non-majors, Macquarie grew steadily across the quarter and finished June just shy of 10 per cent.

“ING has also been regaining ground and finished the quarter at 4 per cent, after dropping to less than 2 per cent in March,” it said.

Among the majors, CBA increased market share to finish June at 18 per cent, while NAB finished with a 7 per cent share.

“NAB’s gains appear to be at the expense of the Westpac group of brands with Westpac, Bank SA, Bank of Melbourne and St George all recording a fall in market share,” the AFG index said.