AFG released their latest data today, which shows the current trends, including lower absolute settlement volumes and values …
… and more loans going to the non-major lenders, as the big four hunker down. Whilst it is myopic, as it looks at volumes through their channels, it is a pretty good indicator of what is happening more widely.
Lower credit volumes will drive prices lower.
They of course emphasis the importance of brokers, as one might expect, given their position in the market:
The release today of the AFG Mortgage Index (ASX:AFG) highlights that the ongoing regulatory intervention into the sector is potentially stifling growth in mortgage applications. Further growth in non-major market share reinforces an increasing appetite for these lenders and highlights the vital role mortgage brokers play in enabling these lenders to compete.
AFG Chief Executive Officer David Bailey explained the results, “Whilst there is likely to be some small seasonal impact on numbers for the quarter, the Index highlights some marginal softening compared to the same period in 2017 with lodgements down just 1.8% on the prior period and just 0.8% on a rolling 12-month basis.
“Given the timing of public holidays and suggestions that Sydney house prices are coming off a little, the fact that there does not seem to be any growth is not surprising,” he said. The only market in the country which appears to be generating ongoing growth is Victoria.
“Western Australia, whilst initially showing signs of some green shoots earlier in the quarter appears to have softened. First home buyers are a known stimulant for an economy, so we hope that the recently announced increased GST allocation to WA will be used in part to stimulate this sector.
Interest Only home loans appear to have levelled off at around 20% over the past three quarters. “With some lenders indicating they again have an appetite for this type of lending, we would probably call this the bottom for this segment of the market.AFG’s data also shows the non-majors have continued to pick up market share to now be sitting at more than 36%.
“AFG has 45 lenders on its panel,” said Mr Bailey. “This distribution model creates competitive tension in the lending market which leads to increased consumer choice and, most importantly, improved loan pricing and service across the entire market which benefits all Australian borrowers.
Industry regulator ASIC concluded in its recent examination of the sector that mortgage broking promotes competition by playing a valuable role in providing a distribution channel for lenders, particularly smaller lenders, and exerting downward pressure on home loan pricing,” said Mr Bailey.
“The presence of the mortgage broking channel is one of the few drivers of competitive tension in the Australian lending market.
