Majors give up some home loan share

Smaller banks picked up market share in the home loan market in September as a result of aggressive fixed-rate pricing.

Mortgage aggregator AFG reported yesterday that the "non-major" share of business written by its brokers rose from 22.2 per cent in August to 24 per cent last month. (AFG classifies Bankwest, St George Bank and Bank SA as majors when it calculates market share.)

AFG general manager for sales and operations, Mark Hewitt, said three lenders on its panel - Suncorp, Citibank and ME Bank - were offering very competitive fixed rates and picking up business.

Hewitt said fixed rates were always popular with first-home buyers on limited budgets. But, because of the current pricing (with three-year rates as much as 75 basis points below standard variable rates), investors and borrowers who were refinancing were going for them as well, he said.

One mortgage broker promoting the case for fixed rate loans is Centric Lending Services, which is advising its clients not to bother waiting for their lender to cut rates; they should just take advantage of the very cheap fixed rates.

Centric Lending said the standard variable rates being offered by its panel lenders were around 6.78 per cent to 6.89 per cent.

Compared with these rates, five-year rates are around 5.89 per cent and three-year rates are around 5.59 per cent.

In a client newsletter issued yesterday, the broker said: "We have one lender at 5.34 per cent for three years for lower risk loans. That is probably 75 basis points cheaper than most people have on their current discounted variable-rate loan.

"Our thinking is that fixed rates represent at least two more Reserve Bank rate reductions."

AFG brokers wrote A$2.7 billion of home loans in September - down 11.8 per cent on August. The average loan size was $393,000.

Fixed rate loans made up 21.5 per cent of the total - up from 19.9 per cent in August.