Refinancers in NSW have flocked to the big four banks, as the uncertainty of COVID-19 weighs on mortgage holders’ financial decisions, new data showed.
More than two thirds of all refinancing activity in NSW was dominated by the major banks in August 2020, surging by almost 15 percentage points compared with the same month last year, according to the NSW Land Registry Services’ (NSW LRS) Residential Mortgage Activity Report.
That has helped the big four banks gain ground, winning 5,195 – or about 48 per cent more – refinances from competitors than what they had in August 2019.
Mortgage refinancing activity has jumped since May 2020, Jerry Goldfried, NSW Land Registry Services’ director of analytics and insights, said.
“Refinancing activity surged in May and has continued through June and July,” he said.
“This is interesting to note during a period when many mortgage-holders are applying for payment deferrals.”
NSW borrowers had been switching from the big four banks to the non-majors, including non-bank lenders, in droves in the past year until COVID-19, the NSW LRD research found.
However, the game began to change after the pandemic hit, with ANZ, CBA, NAB and Westpac seizing back the share of refinancing customers.
The surge in refinancing has been sufficient to outweigh the fall in new mortgages recorded in the COVID-19 period, Westpac’s senior economist Matthew Hassan wrote.
“Reports indicate that a large part of this flow relates to the take-up of fixed rate loans – rates on 3-year fixed owner occupier loans are just 2.35 per cent compared to an average discounted standard variable rate loan of 3.65 per cent,” he wrote.
“If so, and if the wider lending market is moving towards fixed rates, this could have major implications for how rate moves are influencing the housing market and potentially providing more support to house prices.”
Refinancing to non-major lenders decline in NSW
Meanwhile, refinancing activity in NSW with non-bank lenders, other domestic banks, foreign authorised deposit-taking institutions (ADIs, or banks) and customer-owned banks fell.
“NSW LRS data also shows a trend away from non-ADI mortgage lenders, who previously had been experiencing market share growth from new and refinanced mortgages prior to COVID-19,” Mr Goldfried said.
“There is also a clear trend in refinancing away from foreign ADIs and non-ADI mortgage lenders.”
As few as 346 mortgage holders in NSW switched to non-bank lenders in August 2020, which lost 49 per cent of refinancing business compared to the same month last year.
Big four take back their slice of the pie
The major banks recorded the most significant boost to their home loan books in the year to August 2020, recovering their slice of the pie. The big four banks’ total mortgage volume over the month, including new and refinanced mortgages, shot up by some 19 per cent in NSW compared with August 2019. This was largely thanks to refinancing activity, rather than new home loan business.
Aside from the major banks, customer-owned banks (or mutuals) and other domestic banks recorded growth in overall mortgage activity in NSW over the year, up by about 10 per cent and 3 per cent respectively.
Other domestic banks and foreign authorised deposit-taking institutions (ADIs, or banks) lost the biggest share of their NSW business to competitors, with 33 and 30 per cent of customers refinancing to another lender respectively.
New mortgage activity less noticeable
COVID-19 has also had an impact on new mortgages that were not switches from other lenders, though it was not as substantial as refinancing.
The major banks accounted for just over 67 per cent of new mortgages in August 2020, which edged up slightly by nearly 2 percentage points since August 2019. This pushed up the big banks’ new mortgage business by about 5 per cent compared with the same month last year.
But it was other domestic banks and customer-owned banks which saw double-digit growth in their new mortgage business, up by 17 per cent and 17.5 per cent respectively since August 2019.
Non-bank lenders recorded a 29 per cent drop in new mortgage holders taking out a loan with them.
Nationally, borrowers committed to about $19 billion in new home loans, representing an almost 9 per cent jump in July 2020, fresh figures from the Australian Bureau of Statistics (ABS) showed.
Big four banks – lowest rates
Note: Rates are for owner occupiers paying principal and interest. *Westpac’s rates are for customers with a loan-to-value ratio of less than 70 per cent. Data accurate at time of publishing.