(ASX:AFG) The AFG Index released today shows the role of broker has never been better illustrated than over the past few months. The dislocation to the economy and the lives of hundreds of thousands of Australian mortgage holders brought about by the COVID-19 pandemic has meant AFG brokers have been a reliable and important avenue for customers seeking assistance to navigate these uncertain times.
AFG CEO David Bailey explained the results. “This quarter saw AFG record its largest quarterly lodgement result at almost $17 billion. This is a 30% increase on the same time last year.
Breaking down the numbers by state, a comparison to Q4 19 is as follows:
| State | 12 Month Increase |
| NSW | +36% |
| QLD | +34% |
| SA | +21% |
| VIC | +23% |
| WA | +34% |
| NT | +36% |
“Banks closing branches and redirecting these resources towards dealing with hardship cases has meant that brokers have been spending considerable time working through the options for those clients who have taken the opportunity to examine their circumstances and make changes to their financial arrangements.
Given these unusual times, AFG has again elected to disclose additional month by month data.
| Month | Lodge # | Lodge Vol | Avg Loan | Inv % | First Home Buyers % | Refinance % | Upgrader % | Interest Only % | Principal & Interest % |
| Apr-20 | 9,405 | $5,217,890,839 | $554,800 | 26% | 12% | 38% | 36% | 17% | 83% |
| May-20 | 11,269 | $6,127,419,783 | $543,741 | 26% | 14% | 36% | 36% | 16% | 84% |
| Jun-20 | 10,406 | $5,564,824,672 | $534,771 | 22% | 21% | 23% | 42% | 14% | 86% |
“It has been very interesting to see where some of the mortgage activity has come from. Ending the previous quarter, refinancing activity was extremely strong. As some of the refinance incentives from the majors wound down, the market responded in a different manner with a flurry of activity for first home buyers aided by the various government incentives, and an increase in upgraders from those more confident in their financial position.
“Brokers assisting customers to find savings on their home mortgage repayments has seen refinancing activity on a rollercoaster. From 32% in the December quarter refinancing is now sitting at 23% however monthly data shows significant movement during the height of the pandemic, with refinancing activity rising to 38% in April as brokers helped borrowers shore up their positions.
“Supported by federal and state government stimulus packages, First Home Buyers have seized their opportunity to enter the market. First Home Buyer numbers surged to 21% in June, up from 12% in April. In fact, the federal government’s First Home Loan Deposit Scheme saw the largest amount of applications for guaranteed loans, 45%, were made through the broader mortgage broking channel.
Upgraders increased from 36% at the beginning of the quarter to 42% in June.
“Across the past few months, we have witnessed a significant shift in mix of business towards the country’s major lenders. The major banks have used their balance sheet strength to take back market share from the non-major lenders. Once again, it is worth examining the monthly activity for the full picture of movement in the market across the quarter.
| Apr-20 | May-20 | Jun-20 | |
| ANZ | 28.45% | 36.87% | 10.16% |
| CBA | 15.21% | 17.11% | 23.66% |
| Bankwest | 3.75% | 4.12% | 6.05% |
| NAB | 11.10% | 4.48% | 7.71% |
| Westpac | 6.93% | 4.30% | 6.27% |
| BOM | 1.57% | 1.05% | 2.33% |
| Bank SA | 0.39% | 0.27% | 0.41% |
| St George Bank | 2.62% | 1.93% | 3.37% |
| Major Total | 70.01% | 70.13% | 59.96% |
“After peaking at around 70% in the quarter – which is the highest level since 2017 – the flows of business to the major lenders settled back down to 60% in the month of June.
“ANZ was the big winner among the majors, from 9.92% market share last quarter, rising as high as 36.87% in May driven by cash back offers and low fixed rate products. They increased their market share of fixed rate products to 33.66%.
“CBA benefitted from their consistency of service and back office efficiency to reap the reward with their share of the market rising from 14.7% last quarter to 23.66% by the end of June.
Market share of the Westpac group suffered due to a blow-out in turnaround times as they slipped from 20.14% at the close of Q3 to 12.38% at the end of June.
“Extremely competitive offers from the major lenders including cash incentives of up to $4,000 led to a drop in market share for the non-majors. However, processing bottlenecks began to impact turnaround times for the majors by the close of the quarter and the non-majors have begun to take back some ground.
“The role the broker continues to play during this COVID crisis by assisting their clients in making considered choices around their individual home loan circumstances should not be underestimated.
As the pandemic took hold the country’s lenders have responded rapidly to borrowers and have deferred or altered loan arrangements to help homeowners having difficulty meeting repayments.
“AFG Home Loans is no exception. Whilst not reported in the AFG Index, it is pleasing to note that the securitized lending business of AFG has seen the number of customers accessing assistance with the deferral of their repayments decrease from 4.98% in May to 4.34% at the close of the quarter. The number of customers choosing to cease the capitalization of unpaid interest onto their existing home loan by switching to Interest Only payments has slightly increased from 4.30% in May to 4.38%.
“At this time of dislocation in the market mortgage brokers continue to assist their clients by securing better interest rates, fostering competition, and, as evidenced by the lift in numbers, enabling first home buyers to access the market more efficiently with a higher level of certainty.”
