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Borrowers have ditched locking in fixed rates, as fixed rate loans tip 5 per cent in some cases.
The Australian Finance Group’s (AFG) latest index showed fixed rate loans dropped almost 12 percentage points in Q4 compared to the previous quarter reaching 7.7 per cent, marking the lowest recorded amount in 10 years.
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This also compares to a 38 per cent peak during the height of the pandemic when borrowers locked in mortgages at low rates.
While Australian homebuyers put on the brakes amid rising interest rates, AFG brokers saw a 2.54 per cent increase in home loan applications in the fourth quarter of the 2021–22 financial year, picking up the pace from a 11 per cent drop last quarter.
This marked $22.5 billion in lodged applications from the company’s network of around 3,500 brokers.
As Australians adapt to a period of rising interest rates, AFG chief executive David Bailey said refinancing has increased with borrowers looking to “get ahead” of interest rate rises.
“The central bank needs to be careful it doesn’t pull too hard on the interest rate lever as data plays catch up with market activity.
"The support Australian mortgage brokers provide to their customers is clear as they help their customers navigate the changing lending market and ensure a competitive market,” he said.
AFG data revealed the volume of refinancers went up from 24 to 29 per cent.
In addition, the national Loan to Value (LVR) ratio hit 65.4 per cent — the lowest since the data set began (2013).
“The RBA has made its move and lenders have followed suit. The canary in the coalmine may well be first home buyers, already down to 11 per cent of the market, their lowest level for five years,” Mr Bailey said.
As banks continue to pass on the rising costs to borrowers, Mr Bailey said it appears lenders are holding off on a desire to drive more margin into the loan book in the search for book growth.
“When you contemplate their funding task to replace the cheap Term Funding Facility (TFF) over the next few years, it would not be a surprise to see some pressure on passing more than the standard RBA cash rate increases,” he said.
Big four banks market share ticked up
The big four banks and their associated brands’ market share picked back up to 55.9 per cent, after a 5 per cent tumble last quarter.
NAB was the only major bank to see a decrease in market share across its mortgages from 9.2 per cent to 8.44 per cent this quarter.
The data noted NAB’s acquisition of CitiBank was not reflected in this quarter.
ANZ continued to make up ground, lifting from 8.7 per cent to 10.9 per cent, while CBA and Westpac saw similar increases in market share just above 1 per cent — putting them back on track following falls last quarter.
Of the non-majors, ubank and Bankwest saw a slight fall of 0.2 per cent, whereas Bank of Melbourne, BankSA, and St George saw slight upticks.
The average loan size fell approximately $5,000 to $610,662, continuing the drop from last quarter, however remained more than $20,000 on average compared to a year earlier.
As concerns mount over competition in the marketplace following the recent closure of Volt Bank, the swallowing up of 86400 and Citibank by NAB, as well as ANZ’s takeover of Suncorp, Mr Bailey said the role that brokers play in keeping the market competitive was crucial.
The quarter also saw further improvements in lender turnaround times, down from 21.9 days last quarter to 19.8 days for formal approval to be reached.
“In a rising rate environment, the role of a mortgage broker has never been more important.
“The market is competitive, and with a new round of cash-back offers starting to appear, it makes sense that customers will continue to recognise that their broker is best placed to know what options are available to help them,” he concluded.
[Related: Fixed rate volumes plunging: AFG]
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