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Refinancers are driving an increase in the non-majors’ share of the mortgage market, according to recent data.
AFG’s Mortgage Index for September shows an overall swing of 4 per cent of market share to the non-major lenders since August 2012, with an 8.8 per cent shift in the refinancing market segment.
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Mark Hewitt, AFG general manager, sales and operations, said the shift reflects consumers' willingness to shop around.
“I think there is probably a growing proportion of people who are willing to look outside the majors,” he said
“They are now prepared to look at other options and some of the non-majors have really lifted their game in the last year or two,” he said.
According to Mr Hewitt the abolition of exit fees is likely to further increase the swing to the non-majors, but the market will not see these effects for another few years.
“The lack of exit fees only applies for new loans that were written once the fee was abolished,” he said.
“Over time though, in about five years, we will see the lack of exit fees having a larger impact on people’s ability to move around.”
Already contributing to the shift, however, is the increasing willingness of borrowers to forgo approaching a branch and instead to borrow online, or from branchless banks.
“Borrowers can transact their whole relationship online and over the phone these days, and they like that,” said Mr Hewitt.
“This means the banks like Macquarie and ING DIRECT who don’t necessarily have the bricks and mortar network are benefiting,” he said.
The first home buyer and investor market segments also saw a shift towards the non-majors of 1.4 per cent and 2.8 per cent respectively.
Mr Hewitt said the swing was smaller in these market segments as these borrowers often had less choice in lenders, given their circumstances.
“First home buyers usually have a lower deposit and the lending is normally a little bit trickier mortgage insurance-wise, so the lenders with the bigger balance sheets are still better positioned to do those loans.”
“Investors are repeat borrowers and often have their loans packaged up, relying on existing equity to secure the loans, so it’s much harder to change lenders,” he said.
