AFG Competition Index – December 2015

Non-Majors strike back

The AFG Competition Index for the last quarter of 2015 shows that non-major lenders have made up ground after a punishing few months for the challenger sector.

AFG General Manager of Sales and Operations said the recent turnaround had been dramatic. “We have been through a period of uncertainty and this has seen the majors use the size of their balance sheets to dominate their smaller competitors.

“This quarter the tide has turned and non-majors have had their best run since June, just prior to the regulator enforced changes to investment and interest only lending policy being introduced.  Over the last 3 months we have seen the non-majors adjust to these changes and it appears that the flow of business is settling back into a more competitive pattern.

“Looking at the product categories, the non-majors have made up ground across all lending products apart from fixed. Their share of refinancing has increased from 29.8% in August to 39.5% in November. During the same period, investor lending has gone from 27.4% of the total to 29.1% while first homeowners has leapt from 27% to 32%.

The non-major’s share of fixed rates fell from 45.2% in August and a high of 56.8% in May to 42.5% for the last quarter.

“After a three year trend of declining use of fixed rate loans, the tide has turned. The corresponding increase in the major’s share of fixed rate lending has reflected that change.  The next edition of the AFG Mortgage Index, due for release in mid January, will show that fixed rate lending as a percentage of AFG’s overall business, has increased from 11% to 13%.

“Borrower expectations that the likelihood of an interest rate rise in the new year has many borrowers opting to fix their home loans,” said Mr Hewitt.

“Once again, the changing nature of the market means Australian borrowers are recognising more than ever the value of using a broker to help them navigate their way through.”

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