First home buyers stick to Big Four as refinancers show confidence in non-majors

The Big Four banks continue to dominate Australia’s mortgage market, but when looking at refinancing figures it’s clear that the non-major lenders are taking an increasing share.

According to comparethemarket.com.au, an analysis of AFG’s latest data found non-major lenders responsible for 32.1% of refinanced mortgages in the last 12 months. When looking at all mortgages this figure dipped to 26%.

Comparethemarket.com.au’s Abigail Koch said that home owners who are looking to refinance are increasingly willing to consider small lenders, as opposed to first home buyers who stick to the mainstream lenders.

“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,” she said.

It seems the refinancing space offers opportunities for non-major 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,” she said.

First home buyers were noted as more likely than investors to opt for a non-major lender, with 29.1% of first timers opting for a non-major in the last 12 months, compared to 23.5% of investors. Of course, it’s worth remembering that investors are a major part of the market, and their numbers are substantially higher than first timers at present.

In fact, while first time buyers accounted for 10.2% of mortgages brokered by AFG, investors totalled 39.1% of business.

Investors may consider the big four as they have “greater financial muscle” when it comes to financing multiple properties, explained Koch.

“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,” she said.

“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."