Do you use one of the big 4 banks to finance your investment property?
Well…while the big four banks continue to hold a dominant overall position in the home loan market, when it comes to refinancing mortgages, smaller lenders are helping themselves to a considerably larger slice of the pie and hitting the major players hard in the hip pocket.
The finding comes from a leading comparison website for insurance and financial products, comparethemarket.com.au, which found that non-major lenders accounted for just 26 per cent of all mortgages issued through AFG in the last 12 months, but a significantly higher 32.1 per cent of refinanced mortgages in the same period.
Abigail Koch at comparethemarket.com.au says,:
“Homeowners looking to refinance are more willing to consider smaller lenders than first home buyers.
Where first home buyers likely lack confidence and prefer the perceived safety of the ‘big four’, Australians refinancing, having gone through the mortgage process previously, are more comfortable using smaller lenders if it means they can secure a larger loan, lower rate or lower fees.
As a result, they may be more willing to compare a variety of providers.”
In October, the gap closed slightly between the overall percentage of mortgages sold through a non-major lender and the percentage of mortgages refinanced through a non-major lender, at 28.3 and 32.5 per cent respectively, but the refinancing market continues to provide a stronger opportunity for the smaller lenders.
“Refinanced mortgages comprise just over a third of all AFG-introduced mortgages annually, it is a very substantial portion of the overall market. Additionally, data also shows that the percentage of first-time buyers is steadily declining across every state in Australia.”
First home buyers are also more likely than investors to sign on with a non-major lender
29.1 per cent of first time buyers are choosing a home loan from a non-major lender in the last 12 months, compared with just 23.5 per cent of investors.
Investors do, however, make up a significantly higher proportion of the overall lending market, accounting for 39.1 per cent of all mortgages brokered by AFG in the last 12 months, compared to 10.2 per cent from first time buyers. Abigail says:
“The GFC took its toll on smaller lenders. Consequently, customers looking to acquire a mortgage felt more comfortable going with the brands they had known their whole lives, as they felt they would be a safer bet,”
“Now that the economy has stabilised, first time buyers are taking notice that the ‘smaller guys’ may have greater agility than the majors in terms of reducing interest rates and ongoing fees, which has helped them to steal a greater market share. Investors however still tend to plump for the major lenders, as they have greater financial muscle when it comes to taking on the risk of financing multiple properties.”
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