Banks consolidate their hold on the mortgage market

Despite reports that brokers have been encouraging their loan writers to favour non-bank lenders as a way of encouraging some competition and pushing the big banks to improve their service standards, the latest Australian Bureau of Statistics data on housing finance show that the banks still dominate.

Yesterday's ABS numbers show that banks accounted for 88.9 per cent of the 60,395 owner-occupied housing finance commitments, seasonally adjusted, reported in April 2009.

Bank share climbed from 85.4 per cent in April last year to a peak of 89.1 per cent in March.

In terms of the value of housing finance commitments the banks are even more dominant. They accounted for 92.3 per cent of the $16.05 billion of loans, seasonally adjusted, written in April.

The 60,395 new loans represented a 14-month peak in activity but the pace of growth is slowing.

TD Securities senior strategist, Annette Beacher, noted that the 60,395 housing loans recorded in April was 0.9 per cent up on the previous month - the "softest" increase in seven months.

In a note issued yesterday, Beacher said: "This is a soft result compared with year to date accelerated activity.

"It could be the pause that refreshes, as the first home owner grant has since been extended to September 30, or it could be the beginning of exhaustion in the housing market."

The latest data from mortgage aggregator AFG, published on Tuesday, indicates that some of the steam has gone out of the first-home-buyer segment of the market.

AFG reported that first home buyers accounted for 28.1 per cent of new loans in March and came back to 24.8 per cent of new loans in May.

AFG says that share is still above trend but the easing suggests that the extension of the first home owner boost has taken some of the heat out of the market.

It may also reflect tighter lending standards. Many banks are now demanding genuine deposits from first home buyers.

AFG puts the bank share of new lending at 92.5 per cent, more than three percentage points higher than the ABS figure.

An area of strength highlighted by the ABS numbers was construction. CommSec economist Savanth Sebastian reported that the 1.3 per cent increase in loans for new dwelling construction was a seven-year high.