Regional banks face heightened Macquarie Group mortgage competition

Macquarie Group’s domestic mortgage book will almost double to $30 billion in two years, according to a JPMorgan research note.

The doubling will transform the investment bank into one of most significant players in the market.

It still has some way yet to go if it is to become the so-called 'fifth-pillar' in banking behind the four major banks - a position long occupied by ING Bank, which has a $28 billion owner-occupier mortgage book.

But in the short-term the biggest threat is to Australia's regional banks.

Already larger than AMP, Citi and HSBC, JPMorgan noted that the investment bank's growth has been exceptional over the past two years with the portfolio expanding by around 50% to $17 billion.

Recent initiatives include the acquisition of a 25% stake in mortgage aggregator Connective.

Further growth will be fuelled by the redeployment of some $10 billion of surplus cash management account (CMA) deposits, noted JPMorgan.

JPMorgan analysts describe Macquarie's recent push into domestic mortgages as “more meaningful than investors or even Macquarie management themselves may suggest”.

Last July, Property Observer wrote that APRA monthly banking figures showed that Macquarie Bank had grown its owner occupier home loan book by 22.4% in the space of three months, from $3.96 billion in February 2013 to $4.85 billion in May 2013, and more than doubled it in the past 12 months (in May 2012, the loan book was worth $2.2 billion).

APRA ranked Macquarie as the 11th biggest mortgage lender to owner-occupiers.

Macquarie's investor home loan book had also been surging, having risen 21% over the three months from $1.77 billion to $2.14 billion in May 2013.

Alongside its growing home loan book, Macquarie is branching into new areas of mortgage finance funding while cementing relationships with niche home loan players.