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