Major banks dominate mortgage lending

Major banks dominate mortgage lending
Major banks dominate mortgage lending

The Australian Bankers Association may claim that mortgage competition is alive and well in Australia, but figures released by APRA tell a different story.

According to the latest report, the major banks (Commonwealth Bank and subsidiary BankWest, Westpac and subsidiary St George, NAB and ANZ) grew their combined mortgage books by almost 27% over the past 12 months. The banking sector wrote 92.2% of all mortgages in June, according ABS lending figures with the major banks accounting for 88% of all bank mortgage lending.

The major banks advanced $67.8 billion in mortgages compared to $53.5 billion in the previous 12-month period.

In comparison the other domestic banks managed growth of around 20%, but in absolute numbers accounted for just $12.4 billion in mortgages written over the year compared to $10.38 billion in the previous 12-month period.

Over the March quarter, mortgage lending from this sector actually shrunk from $3.16 billion to $3.15 billion while the major banks recorded growth marginal growth of $133 million to $17.62 million.

The APRA figures also reveal the uneven playing field in the banking sector with the four major banks (Commonwealth Bank, Westpac, NAB and ANZ) operating at a profit margin of 34.4% for the year, with the other domestic banks managing 12.5%. 

Overall, the figures reveal the stagnant nature of the housing market over the March quarter bank. 

The banking sector advanced $20.09 billion in mortgage loans from January to March 2011, just a $215 million increase on the December 2010 quarter.

In comparison, banks grew their mortgage books by $790 million from October to December 2010, by $863 million from July to September and by $1.6 billion from April to June.

For the year the cumulative size of the banking sectors mortgage book grew by 8.2% to $1.196 trillion.

The slowing mortgage growth comes as competition among the major banks for mortgage customers intensifies following the government ban on mortgage exit fees.

The figures also reveal how heavily dependent banks are on mortgage lending for their income

According to the APRA figures, interest charged on mortgages accounted for more than half (55%) the total interest income (credit cards, other loans) earned by the banks over the year to March.

Mortgage lending brought in $77.3 billion in interest income for banks over the course of the year out of a total of just over $140 billion.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer


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