Smaller Banks Make Inroads in Home Lending Sector

Smaller banks and non-bank lenders are starting to make inroads in the Australian mortgage market, with the Big 4 banks losing share for the first time in over a year, according to leading mortgage broker group Smartline’s March 2008 quarter trends report.

After increasing market share throughout 2007 in the wake of the credit crisis, the Big 4 banks decreased their share in the March 2008 quarter, down to 65 per cent (from 68 per cent in the December 2007 quarter).

While the Commonwealth Bank recorded the biggest drop in share over the quarter, they still remained the largest lender, capturing 23 per cent of new clients.

Smartline Managing Director Chris Acret said despite the drop in popularity of the Big 4, most borrowers were still shying away from non-bank lenders.

“The credit crisis continues to impact on the Australian market, with most clients seeking the perceived safety and security of the banks,” he said.

“This has seen the Big 4 capture significant market share over 2007, however, the first quarter of 2008 has seen an increase in share of Big 4 competitors, led by Bankwest, St George and AMP.”

Smartline’s Quarter Trends report also showed home buyers were shying away from fixed rate lending. After peaking in the December quarter at 29 per cent of all new loans, the proportion of fixed loans decreased to 26 per cent.

“The shift downward in fixed rate lending reflects a growing sense among economists that the upward cycle in interest rates may well be at its peak, with the language from the RBA shifting more towards a wait-and-see approach for the next few months,” Mr Acret said.

“For home buyers, it is a time of great uncertainty. My advice to anyone unsure of what they should do, whether it be with their existing lending or a new purchase, is to seek the advice of an independent mortgage adviser.

“The service offered by professional and independent mortgage advisers like Smartline has never been more valuable than now.”

The March 2008 quarter also saw professional package-based lending still accounting for the majority of loans written by the Big 4.

While three out of every four variable loans were written in packages, almost half of all fixed rate loans were also written under a professional package.

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