Login
ISCOVER
Rising interest rates, supply constraints and a drop in cashback offers have resulted in AFG brokers lodging a lower value of mortgages in 1Q24.
ASX-listed aggregator Australian Finance Group (AFG) has revealed that the value of mortgage lodgements has dropped in its 3,200+ broker network, falling 6.9 per cent in the first quarter of the 2024 financial year (1Q24) when compared to the final quarter of FY23 (4Q23).
To continue reading the rest of this article, please log in.
Looking for more benefits? Become a Premium Member.
Create free account to get unlimited news articles and more!
Looking for more benefits? Become a Premium Member.
According to the AFG Mortgage Index, AFG’s total lodgment volume was $20.9 billion for 1Q24 (1 July 2023–30 September 2023), down 2.7 per cent from the same period in FY23.
This was despite the average loan size growing by almost $3,000 compared to 4Q23.
Victoria led the way, with its average loan value increasing by $13,000 to $610,399, followed by Queensland growing by $9,000 to $562,190. However, NSW recorded a drop by $10,000 down to just under $718,000, which the aggregator said was its lowest average loan size since the second quarter of FY21.
The number of mortgages lodged by AFG brokers also reduced, falling from 37,270 in 4Q23 to 34,517 in 1Q24.
According to the aggregator, the softening in mortgage lodgements was due to the changing lending environment, citing the cumulative effects of a drop in cashback offers, supply constraints, interest rate rises and cost-of-living pressures.
The aggregator revealed that the decline in volume was driven by a drop in NSW, with lodgements in this state down 7 per cent compared to the prior quarter.
This was followed by Victoria (down 7.3 per cent), Western Australia (down 12.2 per cent) and Queensland (down 2.2 per cent).
Despite refinance activity having been elevated in recent months, AFG revealed that refinance volumes were down 3 per cent to 30 per cent, which it suggested was “largely driven by the withdrawal of cashback offers from the market, the impact of this shift is reflected in the drop in volume for the major lenders as they also return to more rational pricing”.
Brokers aggregating under the group are lodging more investment loans, though, with these volumes up 1 per cent to 30 per cent.
Similarly, loans for first home buyers also grew, up 1 per cent to 12 per cent of the market.
In the first quarter of FY24, AFG found the lending environment remained difficult for non-major lenders, with AFG Home Loans’ market share falling to 5.04 per cent, down from 7.95 per cent in the same period in FY23.
AFG chief executive David Bailey said this was despite the aggregator “gradually seeing non-major lenders become more competitive”.
Mr Bailey added: “The removal and reduction of cashback offers has translated into flows of business away from the big four and their subsidiaries, with their market share down 2.9 per cent to 57.5 per cent.
“Repaying the Term Funding Facility and increasing the level of competition for deposits has meant the major lenders are stepping back from their ‘market share at any cost’ push and are withdrawing sub-economic pricing.
“Time will tell whether the majors hold their nerve to favour better financial returns on their home loan portfolios over what has been demonstrated as a futile chase for market share.”
The aggregator also noted the national loan-to-value ratio (LVR) increased over the quarter, up 0.2 per cent to 65.5 per cent.
Mr Bailey concluded that the slight slowdown over the quarter meant the lender turnaround times “improved marginally” down from 17.4 days to 17.3 days.
[Related: AFG calls for public RMBS]
JOIN THE DISCUSSION