Rising interest rates begin to hit home

Fixed rate market share falls from 20% to 7.7%, AFG reveals

Rising interest rates begin to hit home


By Jayden Fennell

Australian homebuyers are on alert and contacting their brokers to counter rising interest rates, according to the latest AFG Mortgage Index.

AFG CEO David Bailey (pictured) said the company’s Q4 data across the three months to June 2022 showed the volume of refinancers was up from 24% to 29%, as borrowers looked to get ahead of interest rate increases.

“The RBA has made its move and lenders have followed suit,” Bailey said.

“The canary in the coalmine may well be first home buyers, already down to 11% of the market, their lowest level for five years. The central bank needs to be careful it doesn’t pull too hard on the interest rate lever as data plays catch up with market activity.”

Bailey said interestingly, the national LVR ratio at 65.4 % was the lowest AFG had seen.

As the 2022 financial year drew to a close, AFG brokers lodged $22.5bn in home loan applications, an increase of 2.54% on last quarter.

Looking at year-on-year activity, application volumes were 0.47% down on the corresponding quarter last year.

NSW recorded the biggest fall from the corresponding quarter last year, down 6.33%.

“Once again, the support Australian mortgage brokers provide to their customers is clear as they help their customers navigate the changing lending market and ensure a competitive market,” Bailey said.”

“Borrowers have deserted fixed rates down from 20% to 7.7% and highs of 38% during the pandemic, as banks continue to price in anticipated future rates rises.”

Bailey said Australia’s major lenders appeared for now to be holding off on a desire to drive more margin into the loan book in their search for book growth.

“When you contemplate their funding task to replace the cheap term funding facility over the next few years, it would not be a surprise to see some pressure on passing on more than the standard RBA cash rate increases.”

Bailey said the big four banks and their stable of brands had lifted their market share of all mortgages by 5.1% on the previous quarter.

ANZ was up 2.18%, CBA group up 0.41%, NAB down 0.25% even with the addition of ubank and the takeover of 86 400 from Q2 FY22,” he said.

“The Westpac group made the biggest strides – up 3.24%.”

Bailey said among the non-majors, ING was down almost 2% –  halving their market share.

“Macquarie was down 1.31% but Suncorp is continuing to perform strongly up 0.06% to 3.73%.”

Bailey said following on from the recent demise of Volt and the swallowing up of 86 400 and Citibank by NAB, the proposed acquisition of Suncorp’s banking arm by ANZ would further cement the importance of brokers to keep the market competitive.

“The big four banks and their associated brands are ahead across the country with Queensland the only state to have the non-majors in front at 52.44%,” he said.

“The quarter also saw further improvement in lender turnaround times, down from 21.9 days last quarter to 19.8 days for formal approval to be reached.”

Bailey said in a rising interest rate environment, the role of a mortgage broker has never been more important.

“The market is competitive and with a new round of cash-back offers starting to appear, it makes sense that customers would continue to recognise that their broker was best placed to know what options are available to help them.”

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