Soaring mortgage volumes at Macquarie and Bendigo Bank are among the standout features of Australia’s booming home loan market since the pandemic hit early last year.
The two mid-tier banks are the fastest growing home lenders in the country, having expanded their respective mortgage books by 33 per cent and 14 per cent in the 12 months to the end of April, according to APRA data.
However, the strong growth achieved by Macquarie and Bendigo has not been matched by most other mid-sized lenders, with many, in fact, suffering a contraction in home loan assets during the same period.
Suncorp and Citigroup are two home lenders that have done it tough in the last 12 months.
The APRA data shows that Suncorp’s mortgage book shrank by 1.7 per cent or A$728 million in the year ending in April as borrowers refinanced with other lenders.
Borrower outflow was even more acute at Citigroup with the total home loans contracting 3.2 per cent or $221 million to $6.7 billion.
While each of these banks has managed to regain modest growth in recent months, they face big challenges trying to reverse the long-term trajectory of their under-performing mortgage businesses.
In the case of Citigroup this observation is a moot point.
It has almost conceded defeat in the local market after revealing plans earlier this year to sell its retail banking operation.
However, that has not stopped the American-owned lender from trying to regain momentum in its mortgage business before the loan book is transferred to a new owner.
Citigroup yesterday extended a range of cash back offers it launched earlier this year and is holding the line on its most aggressive pricing campaign in more than a decade, which positions its variable rate offer at a meaningful discount to the major banks.
Suncorp also launched a new cashback offer this week that is squarely aimed at borrowers looking to refinance.
The weakness in Suncorp’s refinancing offer is that its advertised variable rates are only marginally better than the four majors and are pitched at a premium to the pricing of faster-growing lenders such as Macquarie and Bendigo associate, Tic:Toc.
Importantly, Suncorp and Citigroup continue to be sharply priced in the fixed rate segment, with each marketing three-year deals at under 2 per cent.
Canstar director Steve Mickenbecker believes both lenders stand a better chance of retrieving market share by focusing on price.
He says borrowers are less likely to be lured by large cashbacks such as the $4000 Citi is promising to hand over on refinancings.
“The quantum of cashback offers seems to have fallen significantly since ANZ was offering close to $4000 a few months ago,” he said.
“Some people might still be enticed by cash sweeteners but they should be getting a low priced loan that will allow them to get ahead on their repayments.
“And I think that’s the message brokers are giving them.”