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The Lendi Home Loan Report - Homeowner snapshot January to June 2019

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The Lendi Home Loan Report (LHLR) analyses trends within the Australian home loan market. By tracking activity across Lendi’s panel of 37 Australian banks and lenders, the report identifies changes in lender and home loan customer behaviour.

The LHLR June 2019 reflects on homeowner (owner-occupiers making Principal and Interest repayments) data captured on the lendi.com.au platform between 1 January and 30 June 2019.

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Interest rate tracking

Analysis of more than 2,000 loans settled across 37 lenders on Lendi’s panel between January and June shows owner-occupiers have consistently secured interest rates below 4% when making principal and interest repayments on new and refinanced loans.

Across the Lendi panel, the median interest rate charged to owner-occupiers repaying P&I ranged from between 3.81% for loans settled in January and 3.64% for those settled in June.

It wasn’t just the smaller lenders offering rates below 4%, the big four banks were offering a median rate which ranged between a peak of 3.98% and a low of 3.79% for loans settled in February and June respectively.

Median interest rates (owner-occupier, P&I)

Month of settlementMedian rate (across the panel of 37 lenders)Big 4 banks median rateOther lenders median rateDifference in median rates (big 4 v other lenders)
January3.81%3.87%3.76%11 bps
February3.80%3.98%3.80%18 bps
March3.79%3.81%3.76%5 bps
April3.76%3.90%3.72%18 bps
May3.74%3.82%3.69%13bps
June3.64%3.79%3.57%22 bps

Lendi co-founder and managing director, David Hyman, comments; “The Royal Commission really highlighted the need for Australians to be vigilant about their financial affairs and this has resulted in changed customer behaviours.

“Homeowners are no longer taking what they are given, they are negotiating upfront and reviewing their loans regularly to make sure they are getting a good deal.”

Smaller lenders undercutting on interest rates

Generally speaking, smaller lenders continue to offer more competitive interest rates to owner occupiers with a good credit history.

Over the six months to June, the median interest rate on loans settled with non-big four lenders for owner occupiers paying P&I was between 5 and 22 basis points lower than the median interest rate charged by the big four banks.

home-loan-report-big-4

During this same six month period, borrowers were voting with their feet. Only 24% of owner occupier P&I loans settled on the Lendi platform were with big four lenders. This is down from 30% in 2018.

For refinancers, the appeal of smaller lenders continues to grow. For the period January to June 2019, only 19% of owner occupiers, paying P&I, refinanced with a big four lender on the Lendi platform compared to 26% in 2018.

Hyman says; “More digital lenders are entering the market and offering highly competitive loan packages. This, together with a lingering sense of mistrust towards traditional banking institutions, continues to fuel demand for loans from non-major lenders.”

Refi customers wipe $162 off the monthly budget

Over the period January to June 2019, homeowners refinancing their P&I loans on the Lendi platform settled with a new median interest rate of 3.76%.

This represents an average interest rate reduction of 56 basis points through refinancing. For those with a mortgage of $340,000 that equates to a saving of $162 a month or $1,944 in the first 12 months.

home-loan-report-refinancing

Lendi’s data shows homeowners continue to refinance primarily to ease cost of living pressure. The key reason for refinancing, stated by 46% of borrowers on the Lendi platform during the first six months of this year, was to decrease the size of their monthly repayments.

Hyman comments; “We know Australians are looking for any way to reduce their outgoings and negotiating a better interest rate on their largest debt can have a significant impact.”

RBA cuts stimulate refinance not new purchase

The first RBA cut to the official cash rate in June prompted a massive surge in refinance activity.

Lendi data shows an increase of 52% in the number of borrowers coming to platform to refinance in June compared to May.

Hyman says; “Refinance activity picked up in June as the RBA cut inspired more homeowners to review and negotiate their current loans.

“The second cut in July will see this trend continue particularly as homeowners look to refinance away from lenders that have been less generous in passing on the cuts.”

home-loan-report-small-lenders

On the back of the RBA cuts, the median interest rate secured by borrowers for loans submitted since the 4 June was 3.65% with the big four and 3.45% with the smaller (non-big four) lenders**.

“It’s early days but we have not seen new purchase activity pick up in the same way refi has,” comments Hyman. “So far, it’s a case of households wanting to get a better deal rather than take on additional debt.”

The pathway to finance

With the rise of digital banks and an increased focus by major lenders on digitising their offering, homeowners are settling their loans without the traditional face-to-face meetings and physical paperwork once associated with getting a loan.

Between January and June, 83% of Lendi customers settled their home loans without a face-to-face meeting.

“Borrowers are looking for convenience and certainty,” says Hyman. “The good news for those looking to buy or refinance is the time taken for lenders to assess a loan application has been contracting since April."

Analysis of loans submitted across the Lendi panel between January and June shows the average time taken by lenders to assess an application was 10.86 days for the big four banks and 9.58 days for other lenders.

The time taken for loan assessment peaked in April when the big four were taking an average of 12.73 days and other lenders were taking 10.03 days to assess. In June, the average time to assess an application was just 6.59 days for the big four banks and 5.3 days for other lenders.

Notes:

The home loan sample analysed was made up of more than 2,000 owner occupier P&I loans.

All interest rates cited in the report are for owner occupier, P&I loans, LVR less than 80%.

** Median interest rates for loans submitted between June 4 and July 12.

Are you a journalist, producer, or researcher? If you'd like bespoke data contact press@lendi.com.au

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The information in this post is general in nature and should not be considered personal or financial advice. You should always seek professional advice or assistance before making any financial decisions.

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Important legal stuff

Lendi is the trading name of Lendi Pty Ltd (ACN 611 161 856, Credit Representative 518849), a related body corporate of Auscred Services Pty Ltd (ACN 164 638 171, Australian Credit Licence 442372). We will never sell your email address to any third party or send you nasty spam, promise.
Lendi is a privately owned and operated Aussie business. Our mission is to provide Aussies with the right experience when choosing a home loan from our panel of lenders including ClickLoans, a related body corporate of Auscred Services. Although Lendi compares over 1600 products from over 35 lenders, we don't cover the whole market or compare all features and there may be other features or options available to you. While Lendi is 40% owned by founders and employees, we have also been supported by some great minority shareholders including Bailador, Macquarie Bank Ltd and a number of Australian sophisticated investors. We have an independent and founder led board.
WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. The comparison rates are based on a loan amount of $150,000 over a loan term of 25 years.
EXAMPLE: This example is current as at 20th October 2016. A Click Loans Online Principal and Interest Loan of $150,000 over 25 years has monthly repayments of $767. This is calculated based on the interest rate of 3.69%, comparison rate of 3.69%, upfront fees of $0 and annual fees of $0.
IMPORTANT INFORMATION: Loan terms of between 1 Year and 40 Years are available subject to lender and credit criteria. Maximum comparison rate will not exceed 14.99% (see comparison rate warning above). Any calculations or estimated savings do not constitute an offer of credit or a credit quote and are only an estimate of what you may be able to achieve based on the accuracy of the information provided. It doesn't take into account any product features or any applicable fees. Our lending criteria and the basis upon which we assess what you can afford may change at any time without notice. Savings shown are based on user inputted data and a loan term of 30 years. All applications for credit are subject to lender credit approval criteria.
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