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ANALYSIS It’s just two months into the financial year 2025 and there are already signs that this year will be a hot one for home loan competition.
With the spring selling season now here – traditionally the busiest time of the year for home buying – lenders have been busy jostling for prime position to take more mortgage business from each other.
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The financial reporting season has so far revealed strong growth for many lenders in FY24, with the banks collectively growing their books by $101 billion (or 5 per cent) and the entire lending system writing 19 per cent more loans in June 2024 compared to June 2023 (according to ABS lending indicators).
But the first look at the home lending growth for FY25 showed that mortgage lending slowed in July.
New data from the Australian Prudential Regulation Authority (APRA), for example, revealed that the banks grew their loan books by $6.7 billion in the month of July (down from the $14 billion the month prior).
Two lenders dominated the growth in the month of July; Macquarie Bank and the Commonwealth Bank of Australia (CBA) both grew their mortgage book by $2 billion over the month (to $121 billion and $561 billion, respectively).
While the two lenders are both growing their home loan businesses strongly, the two banks have very different propositions on how they are doing it.
Macquarie Bank (rapidly becoming one the major players in lending) sees around 90 per cent of its flows come from the broker channel and continues to see receive rave reviews from brokers each month.
However, CBA, which is Australia’s largest lender and has the largest branch presence of any bank in the country, has been focusing growth on its proprietary and digital channels recently, with two-thirds of its mortgage settlements now coming from its direct channels.
With recent commentary from the major bank incensing the broker channel in recent weeks, it remains to be seen what damage (if any) this will do to its falling broker flows.
After these two lenders, ANZ (the most commonly used lender by brokers in July, according to the Broker Pulse survey) saw its book grow by $1 billion (to $301 billion) in July.
However, the other two majors (Westpac and NAB) were less successful. Westpac’s book only grew marginally and NAB actually saw its book go backwards in July (from $320.2 billion to $319.9 billion), according to APRA stats, the first drop since October 2020.
To try and attract more business, the banks have now started to tweak their rates and not just fixed rates.
For example, ubank (owned by NAB) announced a number of interest rate decreases to some of its home lending products on Tuesday (3 September). The changes include decreases to ubank’s variable Flex rates for new-to-bank customers “to help customers get ahead with the right home loan”.
Similarly, Teachers Mutual Bank dropped some of its variable rates for new customers last Thursday, which came hot on the heels of CBA dropping some of its variable rates for new customers, and several lenders cutting fixed rates, too.
Brokers are also becoming increasingly price-focused, with the latest monthly Broker Pulse: Residential Lending survey from Agile Market Intelligence revealing that a growing proportion of brokers believe price to be a determining factor when recommending banks to their clients. Indeed, pricing is the dominant factor for recommending a non-major bank (with more than 75 per cent of brokers stating so), while around 50 per cent said the primary reason they used major banks in July was because of the price of their mortgages.
Brokers recently told the Mortgage & Finance Association of Australia (MFAA) that serviceability continues to be the number one challenge for home loan borrowers looking to refinance; however, these pressures have been falling recently as a result of stage 3 tax cuts and growth in real wages.
To find out more about the Broker Pulse survey and participate in future surveys, visit the Broker Pulse survey website.
[Related: Banks benefit as pricing grows in importance for brokers]
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