The Australian home loan market saw heightened activity in the March quarter despite the looming threat of coronavirus. According to a report released by Australian Finance Group Ltd (ASX: AFG), the year began with a very active property market, driven by low interest rates.
Activity increased throughout February and particularly in March as borrowers sought to shore up positions in the face of the coronavirus threat and complete transactions as shutdowns loomed. March was a record month for Australian Finance Group (AFG), with nearly $6.15 billion in lodgements recorded. This was up from $5.49 billion in February and $3.76 billion in January this year.
March quarter lodgements up
The March quarter is traditionally a quieter period however AFG reported lodgements were up 33% on the same period last year. This was a consistent trend across the country – lodgements were up 32% in New South Wales, 40% in Victoria, 19% in Western Australia, 20% in South Australia, and 32% in Queensland.
Many borrowers sought to take advantage of record-low interest rates by refinancing. Refinance activity rose to 33% in March from 27% in January and February. With interest rates dropping, customers have been hunting for a better deal and the big banks have been seeking to regain lost ground.
Big ASX banks gain market share
Bolstered by strong balance sheets, the major lenders including Westpac Banking Corp (ASX: WBC), Australia and New Zealand Banking Group (ASX: ANZ), National Australia Bank Ltd (ASX: NAB), and Commonwealth Bank of Australia (ASX: CBA) sought to claw back market share.
The major ASX bank shares have been actively pursuing borrowers with cash back offers and competitive rate offerings. The strategy has worked with AFG reporting that the major lenders' market share rose from 53% to 60%, the highest level seen since 2018.
Westpac saw the biggest increase, with the bank's market share increasing from 15% to 20% across the quarter. This was largely driven by generous cash back offers for refinancers and customers new to the bank. ANZ also saw a large increase with its market share rising from 10% to 15% for the quarter.
The non-major banks have lost out as a result of increased market share from the majors. Macquarie Group Ltd (ASX: MQG) saw its market share fall from 11.34% to 8.78% during the quarter. ING also saw its market share decline from 3.45% to 2.78%.
Future uncertain
The immediate future of the Australian mortgage market is uncertain with some commentators predicting a 20% fall in property prices. Consumer confidence has taken a blow and restrictions on auctions and open houses make the process of actually buying a property more difficult. With rising unemployment, some mortgagors may struggle to make repayments.
While the property market seems set for a dip, lenders will continue to fight for quality borrowers in order to shore up market share.
