Mortgage Index – March 2011

LENDER WARS ARE ON – BUT CONSUMERS CAUTIOUS TO BUY OR SWITCH LOANS: FEBRUARY FIGURES

Increased competition among mortgage lenders has seen the market share of non bank lenders rise to levels last seen before the GFC according AFG Australia’s largest mortgage broker. Non bank lenders comprised around 21% of all home loans processed in February according to AFG data. This continues the trend reported by ABS statistics showing that the market share of non bank lenders increased to 15.4% in the December quarter, double its lowest level of 7.5% in the first quarter of 2009.

But despite lenders fighting hard to win new customers, refinancing during February comprised 37.0% of all mortgages processed – somewhat less than the average 38.0% for the past twelve months.

In addition, the AFG Mortgage Index shows that Loan to Value Ratios (LVRs), the value of loans expressed as a percentage of the value of properties, fell to 53.2% in February.

This is the most conservative LVR figure AFG has recorded in six years, showing that mortgage buyers borrowed only around half the value of the properties they were buying or refinancing. LVR figures in the long term have tended to be around mid 60%.

Mark Hewitt, General Manager Sales & Operations says: ‘The Bank Wars are definitely good news for consumers as lenders compete on rates, upfront fees and policy. We’re seeing lenders once again offering up to 95% of property values as they try to attract very cautious consumers back into the market. But this welcome outbreak of competition is being completely overshadowed by the threat of a Deferred Establishment Fee ban. If such a ban comes into effect, non-bank lenders will be badly disadvantaged and consumers could find their options rapidly evaporate.’

Overall mortgage sales for February showed that recovery from the summer of disasters has yet to occur, with the $2,053 million of loans processed down 9.7% on February 2010 ($2,275 million). New South Wales was the only state to show a modest increase on February 2010’s figures (2.7%), with mortgage volumes in other states falling by 8.1% in Victoria, 8.8% in Western Australia, 16.3% in Queensland and 22.9% in South Australia compared to February 2010.

The AFG Mortgage Index also showed a reversal in the popularity of fixed rate loans which had increased to a 12.6% market share in December. These have now fallen to 6.6% as fewer consumers see the value of locking in current rates.

Download – March Mortgage Index – National

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