Cheaper mortgage lenders take business from big banks

The dominance of the big banks in the mortgage market has been loosened by their smaller rivals as competition shifts from fixed to variable rate mortgages.

Figures from PEXA, a digital property settlement platform, show that for NSW and Victoria combined, major banks and their subsidiaries have gone from adding 1,575 more mortgages than they lost in March 2021 to over 2,600 last month.

By comparison, after adding 1,060 mortgages in March 2021, non-major bank lenders saw their mortgage activity climb to 5,787 net last month.

Big banks are reacting to growing competition from smaller rivals as new figures show their dominance is waning.Credit:Peter Rae

Mike Gill, head of research at PEXA, which collects real-time real-time transactions on its e-transfer platform, says big banks are losing ground to non-majors in new home loans and mortgage refinance .

“This was driven by major banks raising fixed lending rates in expectation of higher interest rates, as well as non-majors competing hard on variable rate lending” , he said.

“We suspect that borrowers were also attracted to non-major lenders, given that they can offer faster approval times with an increased likelihood of loan approval, compared to larger banks, with their lending requirements. stricter,” he said.

Yet there is growing evidence that the big banks’ mortgage approval times have improved. Momentum Intelligence’s Broker Pulse report shows steady improvement.

PEXA figures show that non-majors are doing well in new mortgages, and especially well in refinanced mortgages. Most competition for new contracts by lenders is now with variable rates, as fixed rates rose ahead of the impending official interest rate hikes.

Lending indicators from the Australian Bureau of Statistics show that the popularity of fixed rates, which peaked in 2021, is now declining. The proportion of fixed-rate loans funded in February was just 28%, down from a peak of 46% in July 2021.

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