Demand for fixed-rate mortgages “plummeted” during the March quarter and the big banks’ market share has taken a hit in the process, according to a leading aggregator.

Australian Financial Group’s latest Mortgage Index report, based on loans written by the group’s 3500 brokers, shows that the proportion of borrowers fixing their home loans fell from 38.2 per cent in the September quarter last year to 20 per cent in the March quarter.

That is the lowest fixed-rate share in two years.

Lenders used their cheap three-year Term Funding Facility money to compete more aggressively in the mortgage market. Led by the big banks, TFF allocations coincided with the introduction of attractive fixed-rate mortgage rates.

Fixed rates have been on the rise since the middle of last year.

Big bank (and their subsidiaries) share of mortgages written by AFG brokers was above 57 per cent throughout the 2020/21 financial year, before falling to 53.5 per cent in the December quarter last year.

In the March quarter big bank share fell back to 50.8 per cent. It is their lowest share in the time series, which dates back to 2013.

Among other lenders, Macquarie’s share has increased from 9.91 per cent to 11.28 per cent over 12 months and Suncorp’s has increased from 2.63 per cent to 3.67 per cent.

The size of the average loan written during the March quarter was A$615,668 – down a little from the previous quarter – and the average loan-to-valuation ratio was 66.8 per cent.

AFG said lender turnaround times were steady at 21.9 days from application to formal approval.