AFG Competition Index April 2014

Non-major lenders take 32% of first home buyers – but struggle for overall home loan share

Non-major lenders’ share of first home buyer loans rose to a high of 31.7% last month according to AFG, Australia’s largest mortgage broker. But in a highly competitive market, non-majors are struggling to make serious inroads into the hold of major lenders, which has remained constant around 75% of all new home loans during the past year.

AFG’s quarterly Competition Index, published today, shows that the two largest non-majors in the first home buyer market (Table 10) were Keystart (9.7%) and Homestart (3.8%). Both of these are State Government initiatives set up to help first home buyers, in WA and SA respectively. The next biggest non major in the sector is Suncorp with a 3% share last month.

While non-majors made significant inroads late last year in the fixed rate mortgage space (Table 4), seizing 42.3% of all new fixed rate loans in November, this year their share had fallen back to 35.2% by March.

Mark Hewitt, General Manager of Sales and Operations says: ‘Competition has been partly restored in the past two years, with non-major lenders being quite agile in targeting specific products and markets. But they are finding it a struggle to challenge the overall dominance of the major lenders. Collectively they still only account for around a quarter of all new home loans each month. We would like to see this figure higher and are looking forward to seeing if the Financial Services Enquiry offers a solution.’

Macquarie Bank has emerged as the most successful non-major lender if the home loan space over the past year, growing from 3.7% of all home loans in April 2013 to 6.5% last month. (Total mortgages processed by AFG in March 2014 were $4,048 million). Macquarie is strongest in the refinancing and investor sectors, where it accounted for 9.7% and 7.3% of all loans respectively last month.

Among major lenders, CBA and Westpac both accounted for 24% of all home loans processed by AFG, while ANZ accounted for 15.6% and NAB 10.3% (figures include their subsidiary lenders).

Download: AFG Competition Index – April 2014

$300 million RMBS transaction for AFG

AFG is pleased to announce the successful pricing of its third Residential Mortgage Backed Securities (RMBS) transaction. The AFG 2014-1 Trust priced today with domestic and offshore investors participating.

This is the first RMBS transaction for AFG this year, following two successful deals in 2013. With a transaction structure and asset pool consistent with previous transactions, AFG 2014-1 senior notes priced 10 basis points inside the most recent 2013 transaction.

General Manager for AFG Home Loans, Cameron Smith says ‘This is a great result for AFG.  We’re enjoying the ongoing commitment of our 2013 investors and the introduction of several new investors to AFG.   This led to the deal achieving a solid pricing outcome.’

The $300 million pool of home loans was originated through the AFG broker network.  Both local and offshore investors have indicated that they remain comfortable with the home loan pools overseen by the AFG Home Loans business.

AFG has 11.4% of Australia’s total mortgage market.  2014 marks the 20th year of business for AFG, and sees the company with a mortgage book in excess of $89 billion.  The company’s 1,950 members process an average of $3.5 billion in home loans each month, including AFG Home Loans badged mortgages.

Mortgage Index – April 2014


Two in five new home loans last month were processed for investors according to AFG, Australia’s largest mortgage broker. AFG’s Mortgage Index shows that 39.6% of all mortgages processed in March were for investors – the highest such figure the company has recorded in the seven years it has been reporting mortgage data.

A total of 3,384 loans with a total value of $1.6 billion was processed for investors during March by AFG. The company has 11% of the total mortgage market in Australia (Source: AFG and ABS statistics) and while its figures are not definitive, they are strongly indicative of data published by the ABS six weeks later.

Investment activity varied from state to state. In NSW, investors accounted for 49% of all new home loans, in both Queensland and Victoria 37%, and in both South Australia and Western Australia 32%.

Mark Hewitt, General Manager of Sales and Operations says: ‘Investors have been driving the market for most of the past twelve months to the point that two in five of all new home loans in March were for investors. The vast majority of these are Mum and Dad investors taking advantage of the equity in their existing properties, and the low rate environment, to build their property portfolio. The fact that fixed rate loans are now less popular than they have been for most of the past year suggests that borrowers are also less concerned about the prospect of potential rate rises.’

Fixed rate loans comprised 23.9% of all mortgages processed in March, down from 25% in February and a peak of 30.7% in April 2013.

Loan to value ratios, the value of a home loan expressed as a proportion of the property value, remained steady at 68% nationally – the level is has held for much of the past year.

Total loans processed by AFG in March were $4,048 billion– the company’s second biggest month since last October, when it processed $4,057 billion.

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April 2014 – NATIONAL
April 2014 – NSW
April 2014 – QLD
April 2014 – SA
April 2014 – VIC
April 2014 – WA