Competition Index – June 2017

Non-majors step up

Data out today would suggest Australians are testing the competitiveness of the lending market with AFG data showing the non-major lenders picking up nearly 35% of the market, according to the latest AFG Competition Index.

AFG General Manager of Sales and Operations, Mark Hewitt said the data reaffirms the value the mortgage broking channel delivers. “Mortgage brokers deliver true competition in the lending sector and provide real choice for consumers. If a lender is out of the market on service or price they will look beyond the majors to meet the needs of their client.

“Today’s figures show CBA continues to slide with their overall market share down from 20.5% this time last year to 11.8% last month.

“With CBA, AFG believes this is the result of a deliberate strategy to pull back from the investor and interest only markets to meet the lending caps mandated by APRA,” said Mr Hewitt.

“When combined with their subsidiary Bankwest, CBA has dropped their total market share from 25.5% to 15.5% in the same period.

Amongst the other majors, NAB is continuing to win market share.

“NAB have benefited from their recent actions to align their broker products with their direct channels,” he said. “Until recently there was a difference between the products made available to their direct and broker-introduced customers which created confusion for borrowers.”

“Westpac has taken the lion’s share of the fixed rate market for the majors, doubling their share from 10.98% this time last year to finish May 2017 with 22% of fixed rate mortgages.

“Westpac subsidiary St George is also picking up market share of those seeking to refinance.

AFG has 39 home loan lenders on its panel and flows of business to the non-majors are significantly higher through brokers than in the broader lending market. Last month 34.95% of all mortgages lodged by AFG brokers went to the non-majors. This is in stark comparison to the 17% market share of the non-majors outside of our channel.

“Suncorp is the big winner for the non-majors, picking up market share in the fixed rate, investor and refinancing categories.

“Increased competition delivers value to the consumer. Many of the non-major lenders on our panel do not have a branch network. Without the competitive tension mortgage brokers bring to the market, prices would inevitably rise,” he concluded.

Download full report: AFG – Competition Index – June 2017

AFG Mortgage Index – March Quarter 2017

First home buyers step up

AFG (ASX: AFG) has today reported promising signs in the first home buyer (FHB) market as the 17 year old scheme, introduced to offset the effect of the GST on home ownership, receives a shake up.

The national First Home Owner Grant (FHOG) scheme funded by the states and territories has largely been hailed a success as it seeks to ease the hefty upfront costs for new entrants to the market.  The effectiveness of the scheme however has been questioned of late and it appears this may have encouraged governments to act.  “The Victorian state government has recently announced a number of changes to the scheme in that state and New South Wales is currently examining their options to help counter rising house prices in those states,” said AFG Interim CEO David Bailey.

AFG data shows positive signs amongst the FHB market with lodgments lifting back up to 10% for the first time since the first quarter of 2014.

“First home buyer numbers have been in the single digits for some time.  It is good to see state governments looking to support those trying to get a foot on the property ladder.  Time will tell if the proposed changes to the scheme go far enough to assist those looking to buy their first home in our two most populous states.”

APRA-imposed lender policy changes have had an impact on both the investor market and refinancers as many lenders lift interest rates for borrowers.

“Lenders have been told by the regulator to rein in their exposure to the investor market and APRA continues to monitor growth in lending to investors,” said Mr Bailey.  “As a result many lenders have embarked upon a series of rate increases and a tightening of credit policy for investors to comply with APRA’s guidelines.

“This activity has seen investor loans drop from 34% to 32% across the quarter.”

Those looking to refinance have also been impacted, with that segment of the market dropping from 38% to 35% last quarter – its lowest level since the third quarter of 2015.

In overall lodgment numbers, AFG has reported a lift of 8% on Quarter 3 last year driven primarily by increasing activity of upgraders. “With a significant amount of changes being made to the appetites and pricing of lenders, help from a mortgage broker can be vital for consumers trying to navigate the dynamic market that is home lending,” said Mr Bailey.

“A result that should please the regulators is a drop in the loan to value ratio (LVR) in all states apart from South Australia where a marginal increase of 0.4% was evident.  The national LVR is now down to 68.6%, the lowest level since the first quarter of 2013,” he concluded.

Download full report: AFG – Mortgage Index – March 2017

AFG Competition Index – March 2017

Major lenders slide

Australia’s major lenders have again taken a hit as the non-majors continue to appeal to those seeking to finance a home. The latest AFG (ASX:AFG) Competition Index shows the majors’ share of the market dropped again to 65.25% to continue the trend of the last six months.

The recent political spotlight on the major lenders may encourage them to assess their competitive position as they once again fall out of favour with consumers. The non-major lenders have increased their market share to a post-GFC high of almost 35% across the quarter.

“The non-majors have continued to take market share from the majors this quarter, particularly among those seeking to refinance. Their share of the refinancing market grew by 6.5% with the big winners being AMP and ING,” said Mr Hewitt.

The non-majors also gained ground with those looking to fix their interest rate. Non-majors recorded an 8% lift in market share for fixed rates with ME Bank and ING leading the way.

First home buyers were also drawn towards the non-majors with a 2% gain in non-major market share evident from this group.

“Recent changes made by the Victorian state government to exempt first home buyers from stamp duty if they are purchasing a property for less than $600,000 will make this segment of the market one to watch,” said Mr Hewitt.

This latest move comes on top of a doubling of the first home buyers grant for regional purchases in that state and news of a $50 million pilot program designed to help people co-purchase a dwelling with the Victorian government set to launch next year.

Download full report: AFG – Competition Index – March 2017

AFG Mortgage Index – December Quarter 2016

Tale of two seaboards

AFG (ASX: AFG) has today released the AFG Mortgage Index for the final quarter of the calendar year 2016. The data shows year on year growth in lodgement volume for the company of 9.9%.

AFG Chief Operating Officer David Bailey explained the results. “2016 saw the eastern seaboard lead the way with Victoria recording an increase of 23% for the year. After a number of years of lacklustre activity it has been encouraging to see Queensland record 18% growth across the twelve months. Continued growth was also evident in NSW with a 10% increase in lodgements for the year.

“The remainder of the country tells a different story,” said Mr Bailey. “South Australia remained flat across 2016 and the tough time experienced by the WA economy was evident with a 16% drop for the year. The Northern Territory also showed a drop of 18% across the year.

“A recent increase to the First Home Owners Grant and a relaxation in eligibility requirements for Keystart lending is clearly an attempt by the WA state government to help lift the housing market and stimulate the construction sector in that state.

Loan to Value ratio (LVR) remained relatively consistent across the twelve month period at 69%. “The national LVR for the final quarter of 2016 was 0.7% lower than the same period in 2015, which is good news as this means owner equity has improved. Historically the national LVR has been sitting within the 69% range across 2015 and 2016,” said Mr Bailey.

As highlighted in the most recent AFG Competition Index, non-major lenders have been taking market share from the majors. “The major banks dropped market share across all sectors of the market in the final quarter of 2016,” said Mr Bailey.

“Many lenders have been increasing fixed and variable interest rates and have tightened lending to investors. This has encouraged consumers to examine their own situation and we are seeing many pick up the phone to their mortgage broker to determine if their loan is still the most appropriate for their circumstances.

“We expect this trend to continue into the new calendar year as an increasing number of consumers recognise that a mortgage broker is in the unique position of being able to provide a comprehensive view of the alternatives available across lenders and products,” he concluded.

Download full report: AFG – Mortgage Index – December 2016

AFG Competition Index – December 2016

Refinancers flock to non-majors

AFG (ASX: AFG) today reported a jump in the number of Australian mortgage holders looking to leave the country’s major lenders.  Following on from the previous quarter, consumers refinancing their home loans have again turned their backs on the major lenders in their search for savings, according to the latest AFG Competition Index.

AFG General Manager of Sales and Operations, Mark Hewitt explained the shift. “In terms of overall mortgage sales the majors and their subsidiaries slipped by 8.1% to close the quarter with 64.1% of the market. This is a post-GFC low.

The resurgence of the non-majors has largely been driven by those borrowers seeking to refinance. “The non-majors lifted their share of the refinancing market to 43.2% across the last quarter,” said Mr Hewitt.

“Suncorp with an increase of 3.3% and AMP with a lift of 2.1% led the way with refinancers, largely at the expense of the Westpac stable” he said.

Westpac and its other brands, Bank of Melbourne, Bank SA and St George dropped its share of total mortgages by a combined 8.4% for the quarter.

The majors have also pulled back from the investor market, with their share of that segment dropping by 7.0% for the quarter.

The Reserve Bank of Australia (RBA) decision to leave the official interest rate on hold at its December meeting has proved largely irrelevant to lender policies, with many lenders continuing the practice of lifting interest rates outside the RBA cycle.

“In the past week many lenders have been increasing fixed and variable interest rates. They have been targeting areas such as investment loans and this is often a trigger to encourage consumers to shop around,” said Mr Hewitt.

“In the current environment it is worth picking up the phone to your mortgage broker to help understand what is happening in the market and that your loan is still the most appropriate for your circumstances.”

Download full report: AFG – Competition Index – December 2016

AFG Mortgage Index – September Quarter 2016

Loans lift as new financial year gets underway

Australian Finance Group (ASX: AFG) has today released its Mortgage Index for the first quarter of financial year 2017. AFG’s overall loan lodgement volume recorded a lift of 8% from the first quarter of the 2016 financial year to be sitting at a record $15.19 billion.

AFG General Manager Sales and Operations Mark Hewitt said this result was largely driven by existing homeowners looking to save. First home buyers are still in the single digits and investors are steady, albeit at a lower level than seen across the last three years.

“Refinancers are driving the activity with a lift from 36% at the beginning of the 2016 financial year to peak at 39% in the last quarter and close steady the first quarter of the 2017 financial year at 38%,” said Mr Hewitt.

Upgraders were also at historical highs across the last financial year and are sitting at 34% again as we finish the first quarter of FY 2017.

“As these figures show, Australian home buyers are aware that rates are at historical lows and there are savings to be made. If you have a home loan and your interest rate isn’t below 4%, it would be wise to get in touch with a mortgage broker to ensure you are maximizing your opportunity to save’ he said.

Borrowers choosing to fix their interest rates are down from 18.7% last quarter to 15.9% this latest quarter. “For those borrowers with a fixed rate product, I would encourage them to check in with their mortgage broker once the fixed rate period is over as many fixed rate loans can revert to a significantly higher rate than may be available in the market at the time.

“An AFG broker can provide true choice across lenders and products and is in the best position to be able to provide those alternatives and ensure their customer has the right lending solution,” said Mr Hewitt.

Investment lending is down from 34% last quarter to 32%, amid tightening by lenders of investment lending conditions and continued talk of apartment oversupply.

“It is well documented that over the past 12 months regulators have been ‘encouraging’ lenders to tighten up on their investment lending in some areas and they have responded with policy changes and a reduction in discounts being offered.

“It is important to remember that investment lending is often an area where a borrower can really benefit from the assistance of a mortgage broker who knows which lenders are still in the market and the right way to structure finance to meet the needs of the customer,” concluded Mr Hewitt.

Download full report: AFG Mortgage Index Report

AFG Competition Index – September 2016

Refinancers shop around

Australians refinancing their home loans have turned to the non-majors in the past three months in their search for savings, according to the latest AFG Competition Index.

AFG General Manager of Sales and Operations, Mark Hewitt explained the shift. “The non-majors have increased their share of the refinancing market from 31% to 36% in the last quarter.”

“ING are the big winner, lifting their share from 3.1% to 7.8%. CBA has taken a back seat dropping their share of the refinancing market from 20.2% to 14.6%.”

The decision in August by the Reserve Bank of Australia (RBA) to drop the official cash rate saw a flurry of activity by lenders with most choosing to pass on a cut to their own rates, but the level of discount was varied. Lenders also typically passed on a greater interest rate cut to owner-occupiers than to investors and many delayed passing on their rate cuts for several weeks after they were initially announced.

“In terms of overall mortgage sales, ING are at a 12 month high on 5.2% of the non-major market. This is at the expense of Suncorp, who are now sitting at 1.8% after a peak of 7.6% of the non-major market back in March of this year.

Competition between the majors for the investor market saw a number of changes to market share across the quarter. CBA pulled back to close the quarter at 19%, however still tops the list with ANZ jumping to second place with 15.7% and Westpac showing a steady lift of their share of the investor market across the quarter to now be sitting at 15.2%.

“Westpac also cemented their position as the lender of choice for First Home Buyers. They now fund nearly 24% of all First Home Buyer loans.”

The traditional jostling for position that occurs across the market as a whole was again evident in the results for the majors. “Across all mortgage types ANZ and Westpac both regained market share to close out the quarter at 16.9% and 13.8% respectively. At the same time CBA pulled back from pricing discounts to drop their share to 17.5%,” said Mr Hewitt.

Record low interest rates have also seen fixed rate products in hot demand this year. “ANZ has doubled their share of the fixed rate pie since April, with their total share of this market now sitting at 24%,” said Mr Hewitt. “In the same period CBA has seen their share of the fixed rate market shrink by 67%”

“For the non-majors chasing those looking to fix their interest rate, ING was again a winner doubling their share of that segment of the market.”

Download full report: AFG – Competition Index – September 2016

AFG Mortgage Index – June Quarter 2016

Homebuyers on the lookout for savings as financial year wraps up

Australian Finance Group (ASX: AFG) has today released its Mortgage Index for the final quarter of financial year 2016. AFG’s overall loan volume grew by 7% for the full financial year driven by varying results around the country.

AFG General Manager Sales and Operations Mark Hewitt said the result was as forecast by AFG when they released their prospectus last year. “The results today are reflective of how we saw the market tracking.

“The traditional powerhouse states of Victoria and NSW led the way, up 16.6 % and 12.2% respectively. South Australia was up 12.2% for the financial year and Queensland recorded a lift of 4.2% on the previous financial year. On the flipside a drop of 13.4% in WA was not unexpected as the state comes to terms with life post-mining boom.

“Pleasingly the non-majors have lifted to 29.1% of the market,” said Mr Hewitt, with AFG’s own white label AFG Home Loans products finishing the year strongly to generate a market share of 7.2% for the final quarter.

“The numbers are strong despite a turbulent run in to the end of the financial year and the longest election campaign in memory finally coming to a close,” said Mr Hewitt. “Talk of negative gearing changes and changes to investment lending has seen many homebuyers sit on their hands.

When looking at the reasons for home loans being taken out, it would appear many Australians are choosing to shop around for a sharper rate to upgrade the family home.

“Those looking to refinance increased from 37% of AFG’s loans processed for the financial year to 38%. This result is reflective of the high level of competition amongst lenders in this low interest rate environment.” said Mr Hewitt.

“With interest rates at record lows, Australians are quite rightly checking in with their mortgage broker to ensure they are not paying too much for their home loan. The number of people choosing to stay in their homes and upgrade rather than move is also at historical highs, closing out the financial year at 33% of borrowers.

“It would also appear that many Australian home buyers are opting for the safety of knowing what their repayment will be for a set period with the number of people choosing to fix their rates increasing substantially during the year,” he said.

Fixed rate loans as a percentage of overall volume have increased from 14.5% at the start of the financial year to close at 18.7% by the end of the financial year. After peaking at 20% in April and May, the RBA’s decision to drop the cash rate in May saw many homebuyers pull back from fixed rate products as the financial year drew to a close.

“As these figures show, Australian home buyers are aware that rates are as low as they have ever been. If you have a home loan, it would be very wise to get in touch with a mortgage broker to ensure you are maximizing your opportunity to save,” concluded Mr Hewitt.

Download full report: AFG Mortgage Index Report

AFG Competition Index – June 2016

Majors the victors with fixed rates the weapon of choice

The majors have made their move in a bid to squeeze out their competitors with a targeted push for fixed rate market share.

After a soft start in March with 64.2% of the fixed rate market, the major lenders pushed hard to lift their share to 77.9% by the end of May 2016. This saw the non-majors share drop from 35.8% to 22.1% as the quarter drew to a close.

Mark Hewitt, AFG General Manager of Sales and Operations noted ANZ was the dominant player in this game. “ANZ fought hard to lift their share from a flat 11.3% in March and April to close out May at 20.2% of fixed rate loans.”

“Suncorp was the hardest hit with its share of the fixed rate market tumbling from 20.6% in March down to 4.8% by the end of the quarter,” he said.

“The winner in the battle for overall market share between the majors for the quarter was the Westpac Group, with Westpac, Bank of Melbourne, St George and Bank SA delivering a combined 20.5% of all loans in May, up from 17.6% at the end of February.

“This win has helped them make up ground to close in on the CBA stable with the CBA and Bankwest total dropping from 30.8% down to 24.5% as the quarter drew to a close.

For the non-majors, ING delivered a strong result lifting from 1.5% to 4.3% over the quarter.

“At the other end of the scale Bank of Queensland has slid again this quarter. After riding high at 7% back in December 2015 they have dropped back significantly the past two quarters to be at 0.4% by the end of May.

“These types of significant drops are often the result of service levels blowing out. If a broker has a client that needs their home loan settled in a reasonable time frame they are not going to risk placing the business where it will be held up by slow processing times,” he said.

“We have always said that a broker’s decision on where to place the client is driven by pricing, policy and service: A home loan that has a competitive interest rate, with a lending policy that meets the client’s individual circumstances and high quality service that will ensure a smooth settlement.

“All three of these components must line up for the recommendation to go a lender’s way.”

Download full report: AFG – Competition Index – June 2016

AFG Mortgage Index March Quarter 2016 – Fixed Rates in Favour

Australian Finance Group (ASX: AFG) has today released its Mortgage Index for the first three months of 2016.

The quarter saw a greater proportion of home loan customers continue to take advantage of low rates by fixing their home loans. The start of calendar 2016 has seen lending for fixed rate products peak at 17.7% of AFG’s total volume for the quarter. By comparison, the percentage of those fixing their rates in the first quarter of the 2016 financial year was as low as 11.4%.

AFG General Manager Sales and Operations Mark Hewitt said “With sections of the money market making the call of a rate cut in the coming months there are some very attractive fixed rates available. With rates being at historical lows the downside risk of fixing is relatively small so many borrowers are choosing to lock in now.”

“Despite this month’s decision by the Reserve Bank of Australia to leave the cash rate on hold at a record low 2% there are also no guarantees lenders won’t make their own moves outside the RBA cycle. Some are talking about increased funding and regulatory costs and locking the low rates in now is a way borrowers can insulate themselves against any out of cycle increases by the banks. This quarter has also seen investor numbers on the rise again, with an increase from 31% of AFG’s total volume to 33% as lenders return to the investor market having fallen below the growth cap set by the regulator last year.”

AFG’s overall volume was up 5.7% on the same quarter in 2015, with Victoria leading the states with an increase of 15.7%, followed by SA up 11.3%, NSW up 10.5% and Qld recording a rise of 7.6%. The resources downturn has hit WA activity with that state recording a drop of 16.7% and NT dropping by 28% on the same time last year.

“In a positive message for the health of the lending market, the average LVR (loan to value ratio) of 68% is the lowest it has been for three years,” said Mr Hewitt. “This means homebuyers are continuing to borrow within their capabilities.”

Download full report: Mortgage Index March Quarter 2016