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The latest Broker Pulse Residential Lending survey shows product pricing is an increasingly important factor for brokers when recommending lenders to clients.
Analysis of the latest monthly Broker Pulse: Residential Lending survey from Agile Market Intelligence has found that pricing competition is heating up and growing in importance for brokers.
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The July Broker Pulse report surveyed 278 residential brokers on their experiences with lenders for the month, finding that banks – particularly the larger ones – were increasingly dominating broker flows.
Nine of the top 10 lenders used in the month of July were banks, with the five largest lenders dominating broker choices.
According to the survey, ANZ took the lead as the most commonly used lender in July, with 53 per cent of respondents having used it.
Macquarie Bank continued to have a strong presence, too, with 47 per cent of brokers having used it, followed by the Commonwealth Bank of Australia (35 per cent), Westpac (31 per cent), and NAB (29 per cent).
ING, Bankwest (owned by CBA), St.George (owned by Westpac), and Suncorp Bank (now owned by ANZ) followed suit, with Liberty Financial being the only non-bank lender making the top 10 most commonly used lender by brokers in July.
In total, 80 per cent of broker respondents used at least one major and non-major bank throughout July, leaving non-banks playing catch-up with only 50 per cent of brokers using at least one non-bank this month.
Pricing has been a core attraction for brokers when choosing banks. The latest report (and the last 12 months of data from Broker Pulse) showed an increase in the proportion of brokers saying pricing is a determining factor for recommending banks.
In fact, pricing was the dominant factor for recommending a non-major bank, according to brokers. While “client circumstances” remained the number one reason why brokers use major banks, product pricing has been increasing in importance for this segment, too.
Almost half of brokers said the primary reason they used major banks in July was because of the price of their mortgages and over three-quarters of brokers said they used non-major banks because of their rates.
However, only a third of brokers said pricing was the leading factor for choosing non-banks (with client circumstances being the main reason they would use this cohort).
Why is pricing growing in importance?
The price of home loans has been of growing importance to brokers and their clients as servicing challenges continue to bite. Recent analysis from the Parliamentary Library has said that none of the top 10 most common professions in Australia can avoid mortgage stress and, in some cases, even afford to repay a typical home loan.
Several brokers have also recently told The Adviser that they have seen many first home buyers change their home buying decisions based on servicing issues (even though most are able to find solutions to ensure borrowers are able to access financial solutions).
While the cash rate has held firm at 4.35 per cent since November 2023 – and with the central bank quashing hopes of the cash rate falling anytime soon – the majors have begun competing for home loan share by moving their rates out of cycle.
The Commonwealth Bank of Australia, for example, dropped its rates for new borrowings, available through both broker and proprietary channels, on 23 August. This included reductions to some of CBA’s fixed rates, changes to the Life of Loan discount on CBA’s Extra Home Loan as well as the product discount margins on its standard variable rates.
With younger Australians feeling less confident about their ability to own a home than previous generations, affordability cannot be overlooked as a pivotal element when it comes to lender choice.
Individual Australians aren’t the only ones noticing housing affordability issues; the Senate is holding an inquiry to delve into home lending and how regulation can make home ownership more affordable and possible.
“It’s a very important thing that we change course for Millennials and Gen Z who feel that they will never own a house,” senator Andrew Bragg, shadow assistant minister for home ownership, recently told The Adviser.
With cost-of-living pressures, it’s clear that brokers are seeing price as a leading factor when choosing lenders.
To find out more about the Broker Pulse survey and participate in future surveys, visit the Broker Pulse survey website.
[Related: ‘I want to hear from brokers the most’ for housing inquiry: Senator Bragg]
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