Banks push niche lenders aside

Non-bank lenders are having a poor time in the mortgage market, with October Australian Bureau of Statistics data showing bank loans accounted for 75.1 per cent of owner occupied lending, the banks' largest percentage market share since December 1998.

The loss of market share by non-bank lenders since mid year is almost unbelievable, with the 10,900 new loans reported for this segment in October more than 40 per cent lower than the 15,500 in May.

September figures were 28 per cent lower than in August as borrowers preferred banks. The round of interest rate rises by, first, non-conforming lenders and then other prime lenders funded in the securitisation markets, and the widely publicised stress at Rams Home Loans Group explains the shift in borrower preference.

October was more stable, with the month on month loss reduced to three per cent.

Another monthly indicator is the Australia Finance Group mortgage index, and as Australia's largest broker, its monthly sales report can be useful.

The AFG October figures were issued five weeks ago, with new loans rising 19 per cent for the month as borrowers returned to the market after September interest rate fears, where new loans crashed over 21 per cent.

The AFG November Index has now been released, with Mark Hewitt, general manager of sales and operations, saying that the "flight to quality" of borrowers using tier one banks has stabilised, after an initial shift of around four per cent from what AFG identifies as tier two and tier three lenders.

Hewitt expects the second tier banks to regain some of the market share lost over previous months as borrower concerns over credit availability and pricing of some smaller lenders eases.