Home loans defy credit turmoil

HOME buyers flocked to mortgage brokers in the December quarter, shrugging off the effect of interest rate rises, a sagging share market and the Federal election.

Housing / File

Home loans defy credit turmoil

HOME buyers flocked to mortgage brokers in the December quarter, shrugging off the combined effect of interest rate rises, the sagging share market and the disruption of the November federal election.

Mortgage brokers' new business soared by 24 per cent during the period, to $18.24 billion, according to figures released yesterday by researcher Market Intelligence Strategy Centre (MISC).

The trend, based on data from seven lenders accounting for 80 per cent of all broker-generated business, bodes well for the local housing sector's durability in the tumultuous current quarter.

Most surprisingly, churn -- existing mortgage holders switching to a new lender for a better rate -- also declined.

Refinancings accounted for $4.19 billion, a 21.8 per cent decline on the previous December. "This means real demand for new loans by borrowers led the December charge and not a restructuring of business affairs by existing mortgagees as a result of economic pressure," MISC said.

A MISC spokesman said the December quarter performance was "unusual", especially because the period was seasonally soft. Some of the rise could be attributed to higher house prices, but there was evidence of stagnating or declining property values in the period.

The figures also suggest brokers, which account for 30-40 per cent of home lending, are continuing to gain market share at the expense of the banks' direct channels.

Better news for the banks is that their efforts to prevent mortgage churn appear to be paying dividends. Typifying the banks' concerns, St George Bank this month moved to introduce a new commission scale that allows it to claw back 100 per cent of upfront commissions if the life of a loan falls short of 12 months.

Not all brokers are benefiting from the boom in business. According to MISC, the market share of the top five brokers dipped to 54 per cent during the quarter, down from 63 per cent previously.

MISC attributes this reversal to the start of a long-awaited rationalisation that has improved the competitive position of merged mid-tier players.

Last year, National Mortgage Brokers and Mosaic Financial Services merged their $5 billion lending book, while Ray White (Emoca) combined with X Inc to form an $8 billion business.

The James Packer-backed Challenger Financial Services Group has also been aggressive, spending $300 million on buying 100 per cent of mortgage broker aggregators Choice and Plan Australia and a 19 per cent stake in FAST.