Westpac's 'tilt' has failed

Almost two years after Westpac announced that it was making a "tilt to growth", saying it would return to system growth in the Australian mortgage market, the bank has not been able to achieve its goal.

The latest Reserve Bank figures show lenders' housing finance balances increased by 7.2 per cent over the 12 months to February (the Australian Prudential Regulation Authority puts the figure at seven per cent).

Westpac's mortgage book has grown by 6.5 per cent over the same period.

According to APRA's latest figures, Westpac has also performed below system over one month, three months and six months.

Westpac's market share is currently 25.02 per cent, behind Commonwealth Bank on 26.94 per cent and ahead of National Australia Bank on 16.87 per cent and ANZ on 15.29 per cent.

Its share was above 25.3 per cent when it launched the "tilt". At its peak in early 2010 it was 26.8 per cent.

In the period after the financial crisis the big banks dominated a market in which brokers and borrowers preferred to deal with large financial institutions, and those institutions could direct movements in their market share.

Not now. Smaller lenders, such as CUA, Teachers Mutual Bank and bankmecu, have picked up share after investing in digital services and broker distribution.

Brokers groups like Mortgage Choice and eChoice report that they are doing a lot more business with second-tier lenders and mutuals, which are more flexible on product design and pricing.

Mortgage companies and non-conforming lenders are more of a presence in the market now, thanks to a stronger funding flow through the securitisation market.

Deloitte reported in its latest Australian Mortgage Report that consumers were better informed about the mortgage market and more demanding when it came to services.

All these factors mean that the big banks are having to fight harder to win business.