Competition heats up as major lenders look to grab business

It’s a good time to be on the hunt for a mortgage according to one of Australia’s biggest broking networks, as the country’s major lenders look to claw back some market share.

According to the latest Competition Index from broking network AFG, the start of 2016 has seen Australia’s major lenders and their subsidiaries solidly increase their share of the home loan market.

According to the index, major lenders accounted for 66.5% of all home loans written in the year to December 2015; however that market share increased to 71.1% over the year to January 2016 and again to 71.8% in the year to February.

On the flip side, market share for non-major lenders has fallen from 33.5% in the year to December 2015 to 28.2% in the year to February.

With reports of a decline in the demand for finance, AFG general manager of sales and operations Mark Hewitt said lenders have resolved to increase their attractiveness to borrowers, which is why many lenders are now offering interest rates lower than 4%.

In particular the Commonwealth Bank (CBA), Australia’s largest home loan lender, has increased its competitiveness, and it and its subsidiaries now account for nearly a third of the market.

“The most marked increase has been the flow of business to Commonwealth Bank, which has increased its share of our flow from 17% to more than 23% in the last quarter. Commonwealth Bank subsidiary Bankwest was the other lender to record an increase in flow for the same quarter with a jump from 5% to 7%, giving the Commonwealth Bank group an overall market share of close to 31%,” Hewitt said.

“When an organisation with the size and balance sheet power of Commonwealth Bank responds to competition, it can be very difficult for their smaller competitors to match them,” he said.

CBA’s increase in market share was driven particularly by their movement in the fixed rate market, with the lender increasing its share of fixed rate loans from 13.8% in the year to November 2015 to 24% in the year to February.

ANZ and National Australia Bank also increased their fixed rate market share over the three-month period, while Westpac, who remained steady at 9.2%, was the only one of the Big Four banks not to do so.