BIG banks are routing non-bank lenders in the battle for home loan market share, winning back large chunks of business once lost to their more nimble and cheaper competitors.
In a reversal of a decade, banks are now writing 17 out of every 20 new housing loans -- close to 85 per cent -- as their mortgage competitors struggle with the burden of higher wholesale funding costs brought on by the US economic crisis.
Aussie Home Loans, once the biggest thorn in the side of the banks, this week launched a "We'll match you" advertising campaign to try to stem the loss of market share.
Executive chairman John Symond said 99 per cent of the 10,000 borrowers seen in the past two months were able to get a better deals.
It is estimated that non-bank lenders have seen their share of the total home loan market slashed by two-thirds in the past year as the global credit crunch hits home.
The bank winnings come amid a hike in lending rates, forced in part by rising world interest rates and the phasing out of 12-month introductory discount interest rate loans, more often called honeymoon deals.
All housing lending is off sharply, with lending commitments 13.5 per cent lower in May than a year ago -- the weakest annual growth in 16 years.
Bureau of Statistics data shows that wholesale lenders, mainly in the non-bank sector, provided 4 per cent of housing finance in May, down from 13 per cent a year earlier. Banks won as much as 90 per cent of the $13.6 billion home loan market in the same month, up from 79 per cent in May 2007.
CommSec Securities calculated the bank's shares at a record 86.6 per cent, up from 78 per cent 10 months ago, and said it was likely to grow.
Equities economist Savanth Sebastian said: "Banks continue to pick up market share, with the cost of borrowing for non-bank financial institutions still a lot more expensive when compared with the big banks.
"Over the last month, the cost of wholesale borrowing has started to blow out -- trending in a manner similar to when Bear Sterns collapsed in March," he said. "Banks are well placed to increase market share in coming months as less competitive non-bank lenders are priced out of the market."
Other lenders to lose share are building societies, whose share of the mortgage market has almost halved to 1.5 per cent from 2.8 per cent. Credit unions were not as hard hit.
A senior analyst with financial industry research group Cannex, Harry Senlitonga, said the non-bank share of the mortgage market had fallen as higher global borrowing costs forced them to offer fewer products.
Mr Senlitonga said non-bank lenders, which were more exposed to the global credit crunch, would have to phase out discount interest rate loans.
"Many institutions say this is not sustainable in the longer term," he said. "At the moment, it's a tough time for them because funding costs are increasing."
Non-bank lender Resi is offering the Low Start Loan, which charges 7.99 per cent interest for the first year of a mortgage. After that it reverts to 8.99 per cent.
Commonwealth Bank, which raised its standard variable lending rate by 14 basis points to 9.58 per cent last week, is offering a 12-month discount introductory interest rate of 8.55 per cent.
Warren O'Rourke, spokesman for loan broker Mortgage Choice, said global banks like ING and Halifax Bank of Scotland, which owned BankWest, were benefiting as the banks increased their share of the mortgage market.
Tim Blue | July 19, 2008 | The Australian
Additional reporting: AAP
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