Majors lose market share

by 09 Dec 2013
The percentage of loans written by the major banks fell slightly last quarter, according to the latest APRA statistics.

Over the September quarter, 77.6% of all new loan originations were written by one of the four major banks, down from 79.6% over the June quarter, noted the latest RP data property pulse report.

 “Australians overwhelmingly tend to choose to get a new loan from a major bank despite smaller lending institutions generally having higher customer satisfaction ratings than the major banks,” said the report.

Over the September 2013 quarter, ADIs with more than $1 billion in outstanding residential loans lent a total of $76.6 billion in new residential housing loans.

Across these loans, 34.3% were for investment purposes. This figure is particularly concerning for regulators as investors are often only paying off the interest on a loan, instead of paying down the interest and the principal, said the report.

“Although the figure was down from 38.7% over the June quarter, there is still more than a third of all loans in which the principal is not being reduced.”
Major banks are more likely than others to provide interest only loans, found the report, with 39% of all major banks' loans written over the last quarter being interest only.
The RBA has rightly expressed concern over the high level of investment activity in the housing market, said the report.
“Investor owners are chasing the types of returns which simply aren’t currently available in other asset classes,” said the report.
“When capital growth does start to slow or potentially fall, other asset classes may become more attractive and a concern may be that many of these investors all look to exit the housing market at the same time which may in-turn create downwards pressure on the value of all homes.”
The number of loans with a  high LVR were also up in the last quarter, highlighting high investor activity. Investors generally borrow at high LVR levels for tax purposes, said the report.
Over the September quarter 34.7% of the value of new loans had an LVR of greater than 80%, up from 32.7% in June and at its highest level since December 2011 (34.9%).

 Across the major banks, 35.0% of all lending was for loans at an LVR in excess of 35.0% which was the highest proportion since June 2009 (35.6%).