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The Lendi Home Loan Report: Homeowner trends - January to June 2020

By tracking activity across Lendi’s panel of more than 40 Australian banks and lenders, the Lendi Home Loan Report (LHLR) analyses trends within the Australian home loan market.

Interest rate tracking

Analysis of owner occupier loans settled on the Lendi platform over the six months to end June shows the median interest rate charged by the big four banks was 8 basis points (bps) higher than non big four lenders at the start of 2020 and peaked at 12bps for loans settled in March.

After two RBA cuts, the local onset of COVID-19 and fierce competition in the home loan market, the gap between the median interest rates closed for loans settled in April when the big four banks were settling loans with slightly more competitive interest rates than the smaller lenders. Since then, we’ve seen a return to the status quo and big bank interest rates sit above those charged by non big four lenders.

For loans settled over the first six months of 2020, the median interest rate charged by both the big four and other lenders has come down by 35 bps.

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

Settlement monthBig 4 median rateOther lenders median rateDifference in median rates
January3.07%2.99%8 bps
February3.02%2.93%9 bps
March2.92%2.80%12 bps
April2.72%2.74%2 bps
May2.74%2.65%9 bps
June2.72%2.64%8 bps

David Hyman, Lendi co-founder and CEO, comments, “Competition in the home loan market has intensified in the last three months as lenders have fought it out to secure good customers from a growing refinance market and from a contracting new purchase market.”

Swinging borrower preferences reflect price sensitivity

The big four lenders’ popularity grew with the onset of COVID-19 and the introduction of highly competitive fixed rates but has tapered off since.

Hyman comments, “Thirty-eight and 37 per cent of our loans were settled with the big four in May and June respectively however loan submissions over the last two months indicate that the share of settlements going to the big banks will be reduced in coming months.

lhli-chart

“The swing towards the big four was even more pronounced among refinancing owner occupiers as they sought out low fixed rates and cash back offers however this too appears to be normalising.”

lhli-graph

The big four banks continue to have significantly longer loan processing wait times for customers. During the first half of 2020, the average time* from loan submission to settlement was 36 days on refinance applications with non big four lenders whereas it was 54 days with the big four banks.

Savings made in and forgone while refinancing

Lendi data shows owner occupiers paying were able to reduce their interest rates by an average of 96 bps by refinancing during the first half of 2020. On an average loan size of $407,000 this represents an annual saving of $2,295.

Analysis of refinanced loans over the last six months shows discharge times can take between five and 25 days but lenders take an average of 16 business days to discharge a loan before a customer can refinance.

Hyman continues, “The general economic uncertainty brought about by COVID-19 has stimulated refinance activity to record highs as households seek to reduce their outgoings and maximise savings however slow processing by some lenders is deliberately delaying the flow through of benefits to borrowers.

“During the first five months of this year, more than $10 million was left on the table by owner occupiers during the discharge process.”

Social distancing fuels uptake of digital mortgages

Lendi data shows that an increasing number of borrowers were already embracing online home loan processing before the pandemic took hold locally. To be expected, social distancing accelerated this uptake as more lenders modified their policies and customers changed their behaviour.

Between April and end June 2020, Lendi saw an increase of more than 50% in the volume of loans settled on its platform when compared to the same period last year.

Hyman concludes, “Refinance customers have traditionally been more comfortable with digital home loan processes but social distancing measures have brought more new purchasers into the fold.”

Notes:

The LHLR 1H 2020 reflects on homeowner data captured on the lendi.com.au platform between 1 January and 30 June 2020. The sample analysed consisted of more than 2,900 owner occupier, P&I, loans settled during the six month period. *All days including weekends.

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), 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.
# Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
Lendi is a privately owned and operated Australian business. Our mission is to change the way Australians get home loans by providing a faster, smarter and more secure home loan experience designed around the customer’s convenience and needs. Although Lendi compares over 1600 products (2,500+ products including feature and pricing variations) from more than 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 35% 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. Lendi's board is majority independent and non-executive.
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. Fees and charges apply. All applications are subject to assessment and lender approval. Quoted rate applies only to PAYG loans with LVR of 80% or less with security in non-remote areas. All applications are subject to assessment and lender approval.
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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