This article is from the Australian Property Journal archive
THE tighter credit environment has pushed down home loan activity, which has fallen to its lowest levels in five years, according to one of Australia’s largest mortgage brokers, AFG.
The latest AFG Mortgage and Competition Index revealed lending volumes fell 10% in the March quarter compared to the previous quarter, to be 15% lower than a year ago.
The 23,049 loans lodged during the quarter – the lowest number in six years, while the $11.6 billion volume was the lowest quarterly figure since 2014, which was $10.30 billion at the time.
AFG CEO David Bailey said the numbers provide stark evidence that the lending environment has significantly deteriorated.
“It’s a wake-up call for policymakers,” he warned.
“Despite moves by regulators to encourage activity, investment lending remains at an all-time low of 26% amid the well documented concerns around property values, particularly on the eastern seaboard,” he added.
The volume of loans written in Western Australia of just over $1.3 billion represents the lowest volume seen in WA since the inception of the index.
“Whilst there has been some talk of WA moving into a brighter resources-led period of sunshine, it is clear the local economy needs broader stimulus,” Bailey continued.
The tight lending market and falling house prices have contributed to a decline in New South Wales volumes of almost 20% on the same quarter in 2018. Victoria is down 16% over the same period.
All other states fell when compared to a year ago. Only the Northern Territory reported an increase over the quarter.
Meanwhile following the relaxation of APRA-imposed caps on Interest Only (IO) lending, AFG noted a small lift in IO lending driven by the major lenders.
Four years ago, fuelled largely by strong investor demand, IO loans accounted for around 60% of all loans written. Now, with investor loans accounting for a quarter of new business, IO loans account for just 19% of lodgements.
The index showed the market share of non-majors has now been locked in above 40% for more than a year despite a marginal increase for the majors to 58.6% of total lodgements.
“The value mortgage brokers deliver by facilitating a competitive lending environment is most starkly shown by the ongoing decline in the market share of the major banks, which peaked in Q3 of 2013 at 78.2%. Outside of the mortgage broking channel, the majors have control and dominate the market. The distribution capability provided by mortgage brokers enables the country’s non-major lenders to compete,” Bailey said.
Major lenders are ahead on fixed-rate loans, with four out of five homebuyers choosing the certainty of fixing their interest rates with a major lender.
The index also reveals the big losers over the past six months have been ANZ and NAB. NAB’s share has halved over the past six months to now be as low as 5%.
The Westpac stable of brands emerged as big winners, as has Bankwest – whose renewed focus on broker and customer service has paid strong dividends in Western Australia.
Bankwest accounts for more than one in every five WA originations. Together with CBA, Bankwest has a stranglehold on more than 35% of all loans written in the State.
Australian Property Journal
