Low interest rates and property market recovery drive record home loan activity

 In AFG Index, AFG News, Broker, Competition Index, Corporate, Learn, Mortgage Index

Home loan activity has rebounded strongly in the September quarter, with interest rate cuts and an active property market driving record mortgage volume, according to the AFG Index released today.

The Index – acknowledged as a reliable barometer of quarterly home loan activity across Australia – revealed a record $15.7 billion in lodgements in the three months to 30 September 2019. Volumes were up 21 per cent on the previous quarter and 11 per cent on the same period last year. More than 29,000 mortgages were lodged, the highest in almost two years.

The renewed momentum has accelerated the shift away from the major banks, with the market share of non-major banks climbing towards 46 per cent, the highest levels since the GFC more than a decade ago.

Multiple interest rate cuts this year combined with changes to serviceability have encouraged buyers back into the market, particularly customers purchasing their first property. First home buyers accounted for 15 per cent of mortgages during the period – the highest level in seven years.

The low interest rate environment has also cemented the trend away from interest-only loans, with record numbers of borrowers looking to pay down debt through a principal and interest loan. During the September quarter, 82 per cent of loans were principal and interest loans, the highest proportion in the history of the AFG Index.

AFG Chief Executive Officer David Bailey said “We have seen a significant change in the home loan market recently. Best-ever quarters in NSW and Victoria – buoyed by these record low interest rates, a rebound in the Sydney and Melbourne markets and changes to lending criteria – have fuelled the recovery in national numbers.

“The shift in sentiment is encouraging. With the impact of further cuts by the RBA yet to flow through the market, we anticipate the improved affordability will see positive momentum continue through to the end of the year and into 2020.

“There is no doubt customers are benefitting from the enhanced competition in Australia’s home loan market. Consumers are continuing to express a desire to seek out competitive offers. First home buyers, upgraders and mortgage holders refinancing have driven the market share of the non-major banks. From the perspective of loan volumes, we are now approaching a 50-50 split between the majors and non-majors. Something unheard of as little as five years ago.

“This represents a fundamental shift in the dynamic between lenders. Consumers are sending a very clear message that they want the choice and the transparency of a competitive home loan market in Australia and mortgage brokers are delivering.”

Non-major banks accounted for 45.9 per cent of lodgements in the September quarter, the highest since 2007. Macquarie Bank and AMP emerged as the big winners among the non-majors taking business away from the larger banks. Both lenders have more than doubled market share in the past 12 months.

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