Figures show broker value

by Rebecca Pike27 Oct 2018

New figures provide further evidence of the value that brokers deliver, according to a brokerage CEO. 

While AFG’s Mortgage Index for Q1 FY19 has shown the major banks clawing back some of their market share, the non-banks continue to hold near-record highs.

The index also shows first home buyers are the only category of buyers to record an increase in the first quarter of the 2019 financial year.

The volume of mortgages processed by AFG declined by 2% compared to the previous quarter.

The group’s brokers lodged 27,900 mortgages, totaling $14.2billion, compared with 28,883 mortgages and $14.5 billion in the final quarter of the 2018 financial year.

AFG CEO David Bailey said the Royal Commission was continuing to “rattle the market” with lenders tightening their borrowing criteria.

He said compared to the same period last year lending volumes are down by just under 5%.

Investors were most affected, with the category dropping by 1% to 27% of loans processed. Refinancers and upgraders stayed the same at 23% and 43% respectively.

Looking to the states, New South Wales, Victoria and Queensland were both down on the prior quarter, by 2.5%, 6% and 2% respectively.

Gains were recorded in South Australia, up 2% on last quarter and WA with an increase of 6% for the quarter.

Northern Territory saw a huge increase of 22%.

AFG’s index also shows Loan to Value Ratios (LVR) have increased in SA, NSW and WA.

The national average loan size has increased to a record $509,736, led by increases in average loan sizes in NSW, SA and Victoria.

NSW recorded an increase in average loan size of 3%, which Bailey put down to a drop in apartment sales and lenders tightening criteria to investors, which are usually a lower average loan size. He said both factors were driving up the average overall loan size in that state.

The last quarter also saw many lenders increasing interest rates independent of the RBA, causing many borrowers to rethink their arrangements.

Bailey said, “With the recent round of rate rises flowing through, many consumers have been speaking with their brokers to discuss the value of fixing all or part of their loans.

“Fixed rates have risen to 18.9% of loans by product category, whilst standard variable loans dropped to 64.3%. Basic variable products are also back in favour, increasing to 11.2% of all loans.”

Despite a previous rise in the market share for non-banks, the latest figures show that the major lenders clawed back some market share to now be sitting at 59.8% for the first quarter.

The figure is well below the high 70’s they had back in 2013, and much lower than they record outside of the third-party channel.

Bailey added, “The major lenders took some share from the non-majors after treading cautiously for the prior two quarters. The non-majors are still sitting at near historical highs with 40.2% market share after peaking at 40.8% last quarter.

“This is further evidence of the value brokers deliver to competition in the Australian lending market. Refinancers (55.5%) and Upgraders (60.5%) are favouring the competitive offers available from the non-major lenders.”

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