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Start Making Sense, Ep 2: Competition in the home loan market

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Competition in the home loan market has risen alongside the growth in the broker market. However, the major banks’ market share is higher now than it was before the GFC.

Their reliance on the big four banks, including subsidiaries, has fallen from 77 per cent in the December quarter 2013, to 53.1 per cent by the December quarter 2019. 

That’s according to AFG’s Mortgage Index of home loan applications, a good proxy for the broker market.

Initially this fall was driven by price competition, then credit tightening from APRA, and finally, the royal commission.

Despite this swing away from the majors in new business volumes, the major banks’ share of home loans, at 80 per cent, is still above the market share they held before the GFC. 

During the GFC, CBA acquired Bankwest and Westpac acquired St George, which increased the majors’ market dominance from 75 to 85 per cent.

If the market share fall continues at the same rate as the last twelve months, it will take a further three years, and over 14 years in total, to reach pre-GFC levels.

The mortgage broker market share has fallen over the last year by 4.2% to 54.9 per cent, according to the MFAA.

But the introduction of a best interests duty for mortgage brokers could see this rise and accelerate further the fall in the m ajor banks’ market share.

Our latest trust research shows that only one in five consumers are even aware of best interests duty.

However, once implemented, almost half will trust brokers more, with less than 4 per cent trusting them less.

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