Smaller lenders are winning over borrowers as expectations of rising interest rates make fixed-rate mortgages look enticing.
Smaller lenders are challenging the big banks in the home loan market, tripling their share of fixed rate mortgages in 2013.
Less than one in five borrowers are opting for a fixed-rate loan but the popularity of this product is increasing amid forecasts of rising interest rates.
In this space, smaller banks – like Suncorp, ME, Bendigo and Adelaide, and Bank of Queensland – are eating away at the big players’ share of the fixed rate mortgage market.
The non-bank and small bank share of the fixed rate market jumped from 13.6 per cent in February last year to 42.3 per cent in November, data from mortgage broker AFG shows.
The figures are however, volatile, with their share dropping to 38.2 per cent in December.
Still, AFG’s general manager of sales and operations Mark Hewitt says home mortgage competition is at its healthiest level since the global financial crisis.
“The non-majors have been agile and focused on service delivery, targeting specific borrowers, and using very attractive fixed-rate deals to great effect,” he said in a statement.
“While the loan books of major lenders ensure their continued dominance, it is great news for borrowers that they now have much wider choice.”
The popularity of fixed rate home loans grew in November, from 16.6 per cent to 17.4 per cent, official housing finance figures show.
Some economists are expecting the Reserve Bank of Australia to raise interest rates in 2014, from a record low 2.5 per cent, as a weaker Australian dollar adds to inflationary pressures.