ANGRY home buyers are breaking with their banks at unprecedented rates. More than 50,000 home owners refinanced a record $12.6 billion of mortgages in the December quarter, as they voted with their feet to get a better deal.
Bureau of Statistics figures show Victorians led the way. The amount switched to other banks, building societies and credit unions in this state soared 50 per cent in two years, hitting $3.6 billion in the December quarter, up from $2.4 billion in the same quarter of 2009.
The amount refinanced shot up 36 per cent in New South Wales in the same time and 30 per cent in Western Australia. In the rest of Australia, curiously, refinancing activity has been steady or even falling.
Industry observers say the competition late last year was led by the big banks themselves, which were competing aggressively by offering larger discounts to home owners to switch banks in a sluggish market.
That competition has now been scaled back, with the banks reducing their discounts this year. Even so, the Reserve Bank reported on Friday that the average rate on new mortgages by the big four banks last month was 6.59 per cent.
This implies an average discount of more than 0.7 percentage points from their standard variable rates. It explains why Treasurer Wayne Swan has urged home owners unhappy with their mortgage to shop around.
Insiders say the standard variable rate is now an anachronism. Few new loans are written at this rate and the banks are usually quick to offer better deals to customers who threaten to leave.
National Australia Bank was the big winner from the consumer shift, because of its well-publicised lower interest rates. Last year it increased its stock of housing mortgages by $20.6 billion or 13 per cent, more than double the average growth rate of the other three.
Commonwealth, with its subsidiary Bankwest, is the biggest home lender with a book of $307.5 billion at the end of last year, according to data published by the Australian Prudential Regulation Authority.
Westpac and its subsidiary St George are second with $284.6 billion of home loans. The NAB is well behind with $177.4 billion and ANZ fourth with $163 billion.
APRA figures show starkly how dominant the big four have become in the market, as the competition regulators have allowed them to successively take over their main rivals.
The fifth-biggest home lender on December 31 was the local arm of Dutch bank ING, with $37.2 billion. It was followed by Queensland bank Suncorp-Metway ($29 billion), the Bendigo-Adelaide Bank ($22.1 billion) and the Bank of Queensland ($21.4 billion).
Last year for the first time since the global financial crisis, the four second-tier banks increased their home loans marginally faster than the big four. Their stock of loans grew by 8.6 per cent to $109.7 billion, against average growth of 7.5 per cent for the big four.
Competition for refinancing came as new lending shrank to the lowest growth rates since statistics began to be kept 35 years ago. APRA data shows the stock of mortgages held by the big four grew by $114 billion in 2008, $117 billion in 2009, $85 billion in 2010, but just $65 billion last year. The refinancing boom gave a misleading boost to the monthly home finance approvals. Year on year, lending for refinancing grew 12 per cent in the December quarter, but all other home lending shrank 3 per cent.
