Australian borrowers appear to have flocked back to big four banks in droves since the COVID-19 crisis began – but why?
Comparison site Lendi has revealed that more than double the normal number of home loan customers have chosen a big four bank for their mortgage since 1 March 2020.
Between 1 March and 31 May, 38 per cent of Lendi users chose a mortgage option from a big four bank – compared with just 16 per cent in pre-pandemic conditions.
Co-founder and CEO David Hyman said it was during the final weeks of March and into early April that the comparison site “really saw our borrower behaviour deviate from the norm”.
“Preferences for the big four peaked at this time, alongside refinancing activity and hardship enquiries,” he continued.
Interestingly, refinancers led the swing back to the major banks.
While just 14 per cent of Lendi refinance customers refinanced their home loan with a big four bank in the 12 months prior to the pandemic, this skyrocketed to 48 per cent of all refinancing applications over March, April and May.
Lendi said the increased popularity of the big four banks coincided with a number of cashback offers and low fixed rates – spurred on by the RBA’s out-of-cycle rate cut in March.
Mr Hyman further explained that the big lenders “took advantage of cheaper wholesale funding from the RBA and an influx of deposits to offer very competitive fixed-term rates to home loan customers.”
“They became the flavour of the month, most notably in April, but what we’ve seen since is some of the big banks unable to keep up with the demand generated.”
Lendi also highlighted a greater trend towards fixed loans: The proportion of Lendi’s borrowers selecting fixed loans jumped to 26 per cent in the three months to the end of May.
It was a notable increase from the 15 per cent of borrowers recorded in the year to 29 February 2020, the comparison site said, with investors continuing to be more likely than owner-occupiers to fix rates.
Overall, 33 per cent of Lendi’s investor customers chose this option between March and the end of May.
Weighing in, Mr Hyman said that “to date, we haven’t seen the same uptake or swing towards interest-only repayment terms, and the proportion of customers selecting this option remains stable”.
But, “as households come off their mortgage holidays, or JobKeeper payments wind up, we may see an increase in people moving to interest-only terms”.