Big Four banks outprice smaller lenders, especially in first-home buyer market

Australia’s big four banks have increased their market share to now oversee 79.4% of loans, up from 75.7% in September last year, according to mortgage broker AFG.

This was possibly due to outpricing smaller lenders, particularly in the area of fixed loans, AFG suggests.

Bigger banks are increasingly dominating the first-home buyer market as they had 77.9% of the first home-buyer market in March, compared to 74.4% in September 2012.

The larger competitors had also increased their share of fixed rate loans 8.1% since September.

The big four’s share of the fixed loan market now sits at 84.5%.

The size of these major players has helped them grow their already large consumer base, said Mark Hewitt, general manager of sales and operations at AFG.

“The scale of the major lenders gives them an inherent advantage when sourcing funding. As the figures show, they’ve been able to leverage that advantage to the point that they now account for four out of every five new home loans overall,” he said.

CBA still holds its position as the most dominant lender with 21.1% of all mortgages as of last month.

Suncorp, one of the leading players amongst the non-major lenders, saw the largest drop, losing more than a third of its market share from since September, which was 4.6%.

Despite the sunny outlook for the major banks, this may make it more difficult for Australians looking to shop around for more affordable prices, said Hewitt.

“While this is good news for the majors, it’s bad news for consumers who are deprived of the more competitive pricing they would enjoy if we had the same levels of competition seen in other developed economies.”

A boost in some subsidiaries of the major banks has helped their larger groups along in their market share.

BankWest, which belongs to CBA, has jumped from 3.4% in September to 6.3% in March. Homeside, part of NAB group, has shown more modest growth from 9.7% to 10.7%.

This article first appeared on Property Observer.