More competition than ever in Australia’s home loan market thanks to mortgage brokers

Australia’s home loan market is enjoying record levels of competition driven by mortgage brokers, with new lending data released today revealing the market share of non-bank lenders is higher than ever. 

And latest industry figures reveal consumers are increasingly relying on mortgage brokers for help, with three out of every five mortgages in Australia now generated through mortgage brokers.

As the financial services sector prepares for next month’s release of the Financial Services Royal Commission’s final report, the AFG quarterly Mortgage Index confirmed the crucial role played by mortgage brokers in creating a competitive home loan market.

It also provides a timely warning to policymakers of the importance of ensuring the availability of credit and consumer choice do not become sacrificial lambs in the regulatory response to the Royal Commission recommendations.

AFG lodged $13 billion in home lending applications for the final quarter of 2018, down 8% on the prior quarter. Credit tightening is having an impact on volumes in every state – however, the Sydney and Melbourne property markets have been the most significantly impacted.

“Customers must be kept first and foremost in any discussion of changes to the financial sector,” said AFG Chief Executive Officer David Bailey. “Although overall volumes are down our brokers still lodged over 25,000 applications for borrowers during the quarter. This is a fraction of the number of consumers they help with post-settlement and ongoing reviews and support.

“AFG now has more than 50 lenders on our panel and in clear evidence of the vital role mortgage brokers play in delivering a competitive home loan market, non-major lenders’ market share is at a record high of 42.1%.

“The non-majors are becoming an increasingly important part of the assistance brokers provide to customers. Penetration has increased across all categories of borrowers, with non-major market share gains recorded for Refinancers (now 46.8%), Upgraders (42%), First home buyers (32.1%) and Investors (43.4%).”

New Mortgage & Finance Association of Australia (MFAA) data shows mortgage broker market share has grown to 59.1%, reinforcing that consumers are increasingly turning to brokers for their expertise as the market becomes increasingly complex.

The record market share for mortgage brokers was the strongest evidence that consumers were more than satisfied with the customer service provided by brokers, Mr Bailey said.

“A spike in those choosing to fix their interest rates indicates borrowers are bracing for more bank-led rate rises, with quarterly volumes increasing from 19% to 23.1%.

“Notably, the major lenders’ market share of Interest Only and Investment lending has stabilised after APRA’s easing of caps.”

Emphasising the competition the non-majors bring to the market, Mr. Bailey said that Australians need access to a competitive and fair lending landscape and the tens of thousands of small business people across the country working in the mortgage broking industry strive to deliver that service to their clients every day.

“Politicians and policy makers should not lose sight of the enormous value Australian consumers place in the services that these small businesses provide.

“We are yet to see the final report from the Banking Royal Commission, but we remain concerned that some of the testimony we witnessed was clearly aimed at driving consumers back into the big bank branches,” he said.

“Any recommendations flowing from that skewed view that would marginalise the mortgage broking industry would result in a very poor outcome for the economy and hurt the very consumers the Commission was aiming to protect.

“As an industry that relies on customer recommendations, today’s figures demonstrate that consumers are overwhelmingly satisfied with both the service provided by mortgage brokers and the real benefits of competition that we deliver. Consumers won’t want to lose those benefits as part of the industry response to the Royal Commission.”

Download full report here

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