The Australian Finance Group's network of brokers lodged $22.4 billion worth of residential property finance in the final quarter of the 2023 financial year, a 15.6% quarterly increase.

The number of loans lodged also jumped from 32,444 to 37,270.

This is the first time since mid-2022 these figures have increased, with high borrowing costs reducing Aussie's appetite for home loans since the cash rate hikes began in May '22.

While the cash rate remains at its highest since April 2012, strong migration numbers and low unemployment have helped demand for housing hold up better than anticipated, with property prices defying expectation and increasing 3.4% from February to June.

Refinances made up 33% of the volume, the highest proportion since 2017, which suggests mortgage holders are becoming more proactive in terms of shopping around for a better rate.

AFG CEO David Bailey says CBA, Westpac, and NAB eliminating cash back offers could help smaller lenders acquire customers, increasing competition and improving the lending environment for Australians.

"[The big four banks and their subsidiaries have] funding advantages and higher interest rates for existing customers, creating an arbitrage that has enabled them to offer discounts and cash back deals to lure new customers," Mr Bailey said.

“It is pleasing to see cash back offers largely being removed from the market. The next quarter will be the time where we see whether the smaller lenders are now able to compete for customers, after being squeezed by the pricing and cash backs on offer.”

The big four had a market share of 60.4% of the loans brokered by AFG, down slightly from the previous quarter.

A sneak peak into Australia's loan-to-value ratio

The national average home loan size also increased in Q4, up to $602,028 after dropping below $600,000 in 2023.

However, the national loan-to-value ratio dropped to just 65.3%, the lowest on record, which suggests Aussie borrowers are becoming more cautious.

Lower LVR loans are less risky, for both lender and borrower, and can often mean lower interest rates.

Fixed rates on the way back up?

In Q1 2022, 38.2% of the loans brokered by AFG were a fixed rate, but this proportion started to go down dramatically once the cash rate began to increase.

Both variable and fixed rates rose with it, and many Aussies opted against fixing a higher rate, hoping instead that the cash rate would go down and bring variable rates down with it.

However, rates have gone up much quicker and higher than most people anticipated.

This is why Mr Bailey thinks there has been a slight uptick in fixed rates during the past three quarters.

“Nervousness in the market of further rate rises to come has seen the proportion of home loans with fixed rates rise again for the third quarter in a row, although it is still very low and below longer-term averages at 8% of total home loans,” he said.

Proportion of AFG loans with fixed rates
Q1 '22 38.2%
Q2 '22 34.0%
Q3 '22 20.0%
Q4 '22 7.7%
Q1 '23 3.6%
Q2 '23 4.8%
Q3 '23 5.6%
Q4 '23 8.0%

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Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. Some products will be marked as promoted, featured or sponsored and may appear prominently in the tables regardless of their attributes. All products will list the LVR with the product and rate which are clearly published on the product provider’s website. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of . View disclaimer.

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