AFG Mortgage Index – Q1 19 – Home lending in a holding pattern

AFG Mortgage Index figures released today show the country’s lending in a holding pattern with first home buyers the only category of buyer to record an increase for the first quarter of the 2019 financial year.

The volume of mortgages processed by AFG declined 2% on the prior quarter. AFG brokers lodged 27,900 mortgages during Q1 19, totalling $14.2 billion, compared with 28,883 mortgages and $14.5 billion in the final quarter of the 2018 financial year.

AFG CEO David Bailey explained the results: “As the Financial Services Royal Commission continues to rattle the market Australian homebuyers are feeling the pinch as lenders tighten their borrowing criteria. Compared to the same quarter last year, lending volumes are down by just under 5% – a sure sign of a tightening market. The availability of credit has impacted investors most of all, with that category dropping by 1% to 27% of loans processed. Refinancers were steady at 23% and Upgraders were also static at 43%.

New South Wales and Victoria are both down on the prior quarter, 2.5% and 6% respectively. Queensland also recorded a drop across the quarter, down 2%.

Gains were recorded in SA – 2% up on last quarter, NT – up 22% and WA with an increase of 6% for the quarter.

Loan to Value Ratios (LVR) have increased in SA, NSW and WA.

The national average loan size has increased to a record $509,736, led by increases in average loan sizes in NSW, SA and Victoria.

“NSW has recorded an increase in average loan size of 3%, which we suspect is the result of a drop in apartment sales and lenders tightening criteria to investors – which are usually a lower average loan size. Both factors are driving up the average overall loan size in that state.

During the quarter many lenders moved to increase interest rates independent of the RBA, causing many borrowers to rethink their arrangements. “With the recent round of rate rises flowing through, many consumers have been speaking with their brokers to discuss the value of fixing all or part of their loans,” he said.

“Fixed rates have risen to 18.9% of loans by product category, whilst standard variable loans dropped to 64.3%. Basic variable products are also back in favour, increasing to 11.2% of all loans.

The major lenders clawed back some market share during the first quarter of the new financial year to now be sitting at 59.8%. This figure is still well below the high 70’s they had back in 2013, and much lower than they record outside of the third-party channel.

“The major lenders took some share from the non-majors after treading cautiously for the prior two quarters. The non-majors are still sitting at near historical highs with 40.2% market share after peaking at 40.8% last quarter.

“This is further evidence of the value brokers deliver to competition in the Australian lending market. Refinancers (55.5%) and Upgraders (60.5%) are favouring the competitive offers available from the non-major lenders.

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Mortgage Index – June 2018 – The new normal

Today’s quarterly AFG Mortgage Index figures (ASX:AFG) show it is ‘business as usual’ as a vibrant mortgage broking industry delivering choice and competition to the market continues to be embraced by Australian consumers.

Total mortgage lodgement numbers for the last quarter were up on the prior quarter to finish the 2018 financial year at 28,896. Lodgement volume for the quarter increased on the previous quarter to $14,589,632,848.

AFG Chief Executive Officer David Bailey said regulatory intervention in 2017 and tightened lending criteria appear to have established a structural change that may be the ‘new normal’ for the market.

“Investors are sitting steady at 28% of lodgements, first home buyers have been at 13% for the past four consecutive quarters,” said Mr Bailey. “Refinancers are at 22% and upgrader categories at 43% are also forming an established pattern.”

Mortgage holders are also taking advantage of low interest rates to pay down the principal with P&I loans sitting at 81%.

The popularity of fixed rates has fallen with a drop to 15.5% for the quarter recorded, down from 26.4% in the first quarter of FY18.

“A sign that regulators will welcome is the drop in Loan to Value Ratios across the states, with the national LVR now at 67.9%,” he said. “Another pleasing aspect of these figures is the fact that the gap between major and non-major lenders continues to shrink.

“Non-major growth across multiple categories – investors, refinancers and upgraders suggest consumer comfort with looking outside of the Big 4 for a lending proposition that meets their needs.

Interest rate, loan features, fees and lender criteria are all key features for a consumer evaluating their options. A mortgage broker is uniquely placed to be able to efficiently and fairly compare the alternatives available across major and non-major lenders. “As outlined in the ACCC Residential Mortgage Price Inquiry Interim Report 1, discounting by the major banks is lacking in transparency and the time and effort required for a consumer to obtain interest rate comparisons and negotiate for a discount is very difficult,” said Mr Bailey.

“The presence of the mortgage broking channel is one of the few drivers of competitive tension in the Australian lending market. A consumer dealing directly with a lender has limited negotiating power or knowledge of the interest rates and lending criteria offered by competitors. A mortgage broker with access to a panel of lenders drives competition between lenders to the benefit of all consumers, not just their own clients” he concluded.

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1 – https://www.accc.gov.au/about-us/inquiries/residential-mortgage-products-price-inquiry/interim-report

Competition heats up. Competition Index – June 2018

The AFG Competition Index released today shows further evidence of a structural shift in the Australian lending market as non-major lenders again seize market share from the majors. Non-major lenders have seen their overall market share of new loans hit a record 40.97% in May 2018.

AFG General Manager – Broker & Residential, Mark Hewitt explained the results: “The major lenders’ share of new business is declining, with their overall market share continuing a five-month slide to be sitting at 59% at the end of last month.

Among the majors Westpac and its subsidiaries Bank of Melbourne, Bank SA and St George have been hardest hit, with each of their brands recording a drop in market share.

“Mortgage brokers are drivers of competition in the Australian home lending market. A consumer walking into a bank branch has a choice of a handful of products that may meet their needs. Consumers talking to an AFG mortgage broker have access to thousands of alternatives depending upon their individual circumstances. Many of those products are from the non-major lenders, and many of those lenders do not have a branch presence,” he said.

The borrowers turning to non-major lenders in greatest numbers are those seeking to fix their interest rates, with market share for the non-majors in this category steadily increasing to finish the quarter at 32.57%.  “ING and Suncorp are the non-major lenders of choice for fixed products, with their share of the fixed rate market sitting at 6.08% and 5.39% respectively.

“The major lenders have been pulling back from the investor market to meet regulatory caps and as a result the non-majors are filling the gap in the market,” said Mr Hewitt. “Non-major market share among investors rose from 33.52% in February to 42.35% at the end of the quarter – an increase of 26%.

“Macquarie is proving popular with those looking to refinance, recording a market share overall of 5.63% but 8.33% in the refinancing category. Virgin Money has made rapid inroads in the short time they have been on AFG’s panel, with their share of the market in the same category rising from 0.1% to 0.86% in three months.

“First home buyers looking for a simple, low cost mortgage product have found it in AFG Home Loans with market share for AFG’s white label products rising across the quarter for this category from 4.76% in February to finish at 6.3% by the end of May.

Teachers’ Mutual Bank also recorded an increase in market share among first home buyers, lifting from 2.8% to 3.14% for the quarter.

These figures show that competition is alive and well in the Australian lending market.  The continued preference by consumers for mortgage brokers and the choice they deliver over major bank branches, demonstrates that brokers are delivering the right consumer outcomes,” he concluded.

 

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Competition vital for all mortgage holders. Mortgage Index – April 2018

The release today of the AFG Mortgage Index (ASX:AFG) highlights that the ongoing regulatory intervention into the sector is potentially stifling growth in mortgage applications. Further growth in non-major market share reinforces an increasing appetite for these lenders and highlights the vital role mortgage brokers play in enabling these lenders to compete.

AFG Chief Executive Officer David Bailey explained the results, “Whilst there is likely to be some small seasonal impact on numbers for the quarter, the Index highlights some marginal softening compared to the same period in 2017 with lodgements down just 1.8% on the prior period and just 0.8% on a rolling 12-month basis.

“Given the timing of public holidays and suggestions that Sydney house prices are coming off a little, the fact that there does not seem to be any growth is not surprising,” he said. The only market in the country which appears to be generating ongoing growth is Victoria.

“Western Australia, whilst initially showing signs of some green shoots earlier in the quarter appears to have softened. First home buyers are a known stimulant for an economy, so we hope that the recently announced increased GST allocation to WA will be used in part to stimulate this sector.

Interest Only home loans appear to have levelled off at around 20% over the past three quarters. “With some lenders indicating they again have an appetite for this type of lending, we would probably call this the bottom for this segment of the market.

AFG’s data also shows the non-majors have continued to pick up market share to now be sitting at more than 36%.

“AFG has 45 lenders on its panel,” said Mr Bailey. “This distribution model creates competitive tension in the lending market which leads to increased consumer choice and, most importantly, improved loan pricing and service across the entire market which benefits all Australian borrowers.

Industry regulator ASIC concluded in its recent examination of the sector1 that mortgage broking promotes competition by playing a valuable role in providing a distribution channel for lenders, particularly smaller lenders, and exerting downward pressure on home loan pricing,” said Mr Bailey. “The presence of the mortgage broking channel is one of the few drivers of competitive tension in the Australian lending market.

 

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Mortgage brokers shopping around for their clients. Competition Index – March 2018

The release today of the AFG Competition Index shows the flow of business to lenders has once again been volatile, highlighting evidence that mortgage brokers are the only ones equipped to provide Australian borrowers with a complete picture of the many lending options available to them.

AFG General Manager Broker & Residential, Mark Hewitt explained the results: “The gap between the first placed major lender, Westpac at 14.21% of the market and third placed ANZ at 12.32%, is the closest it has been for some time.

“As AFG has stated many times, a consumer dealing directly with a lender has limited negotiating power or knowledge of the interest rates and lending criteria offered by competitors. This has been further validated by the findings of the interim ACCC Residential Mortgage Price Inquiry. The presence of the mortgage broking channel is one of the few drivers of competitive tension in the Australian lending market.

“Whilst the majors’ market share lifted a couple of percentage points across the quarter, rising from 62.51% in November 2017 to 64.03% at the end of February, three of the four majors went backwards.

“ANZ dropped from 14.93% in November 2017 to 12.32% at the close of the last quarter. CBA’s share of the market dropped from 14.99% to 13.63%, and their subsidiary Bankwest dropped from 3.74% to 3.35%.

NAB also recorded a drop, from 8.57% in November 2017 to finish the last quarter at 7.67% of the market.

“Only the Westpac group of brands, Westpac, St George, Bank of Melbourne and BankSA grew, with their market share lifting from 20.28% in November 2017 to 27.05% at the close of the last quarter,” he said.

“Interestingly, the Westpac group’s major gain came in the area of fixed rate loans with their share of that product type increasing from 23.63% to 44.24% of the market.

In a sign the majors are again open for business for investors, their share of that segment of the market has lifted from 64.82% in November 2017 to finish February at 66.78%.

The non-majors’ market share is now at 35.97%. “Amongst the non-majors AMP recorded an increase in market share and lifted from 2.27% to 4.62% and Homeloans recorded an increase from 0.14% to 0.33%. WA-based Keystsart, lifted from 0.18% to 0.26%.

Suncorp fell from 4.21% to 2.81% and Macquarie contracted from 4.66% to 4.26%. Bank of Queensland lost almost 50% of their share to finish February at 0.86% of the market.

The non-majors were once again favoured by First Home Buyers, with their market share in that category lifting from 31.31% to 33.38%.

Victorians paying more: Mortgage Index – December 2017

AFG (ASX: AFG) has today released the AFG Mortgage Index figures for the final quarter of 2017.

As the year drew to a close, Victoria stands out as the state to watch with an increase in average loan size over the past 12 months nearly double the size of the increase in New South Wales.

“There has been a lot of focus on Sydney house prices, and therefore mortgage sizes, but homebuyers in Victoria are seeing the biggest increases,” explained AFG CEO David Bailey. “In Victoria, the average mortgage size has jumped 3.2% in the final quarter of 2017 to now be sitting at $496,815.”

The increase in the last 12 months for Victoria was $20,385 compared to $10,662 for NSW. With the average NSW mortgage already substantially higher than in Victoria, the increase over the last 12 months was 4.3% for Victorians compared to 1.8% for those buyers in NSW.

“The average loan size in New South Wales is now $613,084. Queensland has increased by 3.4% to now be sitting at $416,921. South Australia is up 3.4% to $390,706. The Northern Territory is up 22% to $469,502, albeit from a low volume. Reflecting the challenges being encountered by the WA economy, the state’s average loan size is down 1.1% to $439,944.

Overall, the national average loan size is up 2.8% over the past 12 months.

“Fixed rate products have dropped back to 21.9% of the market after a high of 26.5% last quarter and First Home Buyers are sitting steady at 13% for the second consecutive quarter.

“What is noticeable is that the majors are continuing to lose ground to the non-majors, as borrowers increasingly look at alternatives to the major bank owned brands. The majors have 64.2% of the market compared to the non-majors sitting at 35.8%,” said Mr Bailey.

“Whilst tightened lending criteria continues to impact the market, particularly with respect to refinancers, our overall volumes compared to prior year remain strong. Refinancers now represent just 22% of the market. Investors have also been caught in the cross-hairs and have dropped to 28%.”

As they turn away from Investors, the majors are proving competitive for First Home Buyers (69.6%). Overall, Upgraders are proving attractive to lenders and now represent 44% of the market.

“Interest rate and lending policy changes have meant many clients are turning to their mortgage broker for help to understand what the changes may mean for them,” said Mr Bailey.

“Individual circumstances are assessed differently by lenders, so having the insight into which lender may be the right fit for your needs is vital to a consumer looking for finance. A mortgage broker is uniquely placed to have that information.

 

Majors lose focus as all eyes on Canberra. Competition Index – December 2017

AFG has today released Competition index figures for the final quarter of 2017.  Once again, Australia’s major lenders have taken a hit with their market share now down to a post-GFC low of 62.57% of the mortgage market. The majors lost ground in all categories since the time of the last AFG Competition Index, including a drop of more than 3% in refinancing and more than 2% in fixed rates.

AFG General Manager – Broker and Residential Mark Hewitt explained the results: “The major banks have been under intense scrutiny by government and the regulators and it is probably no wonder if they have been distracted,” he said.

“With the recently announced Royal Commission into the banking sector we all hope lenders can respond whilst still maintaining a focus on their customers.

The Royal Commission, and the industry need to focus on how competition can be further improved and this should include the impact the government guarantee has on competition.

“The Westpac group as a whole were the only ones to make up any ground, up from 19.19% at the time of the last AFG Competition Index to finish the quarter at 20.33%.

ANZ lost the most ground amongst the major banks, down 3.5% for the quarter.

The non-majors now enjoy a market share of 37.43%.

“The non-majors picking up market share were Macquarie, with an increase from 2.91% to 4.70% and AFG Home Loans with a lift from 8.88% to 10.15%,” concluded Mr Hewitt.

Regulator activity begins to bite: Mortgage Index – October 2017

AFG’s latest Mortgage Index results released today shows that major structural change in the Australian lending landscape is continuing.

“Today’s results paint a very different picture from this time last year,” said AFG CEO David Bailey. “Regulator-led tightening of investor lending has led to a further drop in investor volume and they are now sitting at an all time low of 29% of the market.

The shift in lender appetite from investors to upgraders is also evident in average loan size. “The national average home loan is now sitting at an all time high of $491,000,” said Mr Bailey. “This increase can be explained by the fact that people generally spend more for their primary place of residence than they do for an investment property.

The number of people looking to refinance has dropped to 25%, whilst those keen to upgrade their living situation is increasing with upgraders now representing 41% of the market. “This is also likely to be a reflection of the lack of lending options on the table for investors wanting to refinance, as lenders pull back from the investor market to meet regulator demands,” said Mr Bailey.

The major lenders’ share of the market is also down to a post-GFC low of 64.4% as borrowers continue to explore alternatives outside of the major bank owned brands.

Looking at loan type, fixed rates are now at 26.3% of all loans which confirms many Australians are anticipating that the next interest rate move will be up,” said Mr Bailey.

First home buyers are enjoying their third consecutive quarter in double digits since the beginning of 2014. “National market share for first home buyers has lifted to 13% across the last quarter, helped in part by new stamp duty concessions kicking in on July 1 for this segment of the market in Victoria and New South Wales.”

Victoria continues to set the pace with lodgement volumes in that state up 27% on the first quarter of last year whilst every other state has lost momentum to varying degrees. The strength of the Victorian home market is also evidenced in the average loan size for that state, which is 5% higher than it was at the same time last year.

“Overall, volumes are up on the previous two quarters, however, compared to the same time last year they are flat. This translates into the view that regulator-led changes are being felt everywhere except Victoria,” concluded Mr Bailey.

 

Majors back in the hunt: Competition Index – August 2017

In a sign of renewed commitment to the broker channel, major lenders have taken back control from the non-majors with a lift in market share across the last month according to the latest AFG Competition Index.

After a low of 63.39% in June 2017, the majors have risen each month to round out the quarter at 65.90%,” said AFG General Manager of Residential and Broker Mark Hewitt.

“Fixed rate products have recorded the largest increase with the majors now claiming 74.8% share in this category. ANZ is taking the lion’s share of fixed rate business jumping from 10.51% in June to 20.82% by the end of the quarter,” he said.

This rise has largely been at the expense of Westpac, which recorded a drop of more than 7% over the same period.

“Westpac also fell back in the Investor category, dropping from 16.92% in June to 12.91% at the end of August. ANZ have also taken the lead in this category, with a lift from 13.22% to 19.99% over the quarter.

“ANZ is also appealing to those seeking to refinance,” he said. “Their market share amongst refinancers has jumped from 15.22% to 18.5% across the quarter.”

Amongst the other major lenders, CBA rebounded from 12.45% total share at the start the start of the quarter to finish on 14.25%.

In the non-major category, AFG Home Loans finished the quarter with a market share of 8.85% as a result of share gains in refinancing, investor and first home buyer categories.

Suncorp also proved competitive over the quarter averaging almost 5% total market share.

“AFG also welcomes Credit Union Australia (CUA) and Homeloans Limited to our panel and we look forward to introducing these lenders to our brokers”.

“The presence of these additional leading non-major lenders provide increased choice for consumers looking for finance,” he said.

AFG Mortgage Index – June Quarter 2017

Non-majors and fixed rates in favour

Australian Finance Group (ASX: AFG) has today released the AFG Mortgage Index for the final quarter of the 2016/17 financial year.

AFG CEO David Bailey welcomed the news that the non-major share of the market is now at 35%. “Significant structural change to the lending market brought about by tighter lending rules has seen increased flows of business to the non-major lenders.”

“As the majors re-price their mortgages and change lending policies to meet regulatory caps, consumers are turning to mortgage brokers to get a full picture of the choices on offer in such a competitive market,” he said.

“The non-major lenders are helping fill the void left by some of the majors and consumers are benefiting from the fact that a mortgage broker can offer products from those lenders without a branch network.”

A series of rate rises and policy changes has also had an impact on the investment market. “In what will no doubt be welcome news for the regulator, investment lending has dropped to 31% of our total lending for the quarter as lenders continue to tighten their criteria,” said Mr Bailey.

Refinancing figures are also down from 35% to 29% as refinance options for borrowers with interest only or higher LVR investment loans decrease and others choose to stay put until the market settles. Lender policy restrictions have also seen the average loan size fall in every state apart from Queensland.

“The part of the market that has been virtually untouched by regulators and lenders is the principle and interest owner category. As a result, those opting to upgrade their homes have increased from 34% to 39% in response to some attractive lending offers,” he concluded.

In a sign that homeowners are picking the bottom of the market for interest rates, the number choosing to fix their rate has jumped significantly to finish the quarter at 23.7%.

Download full report: AFG – Mortgage Index – June 2017