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The Commonwealth Bank of Australia (CBA) has released its financial results for the half year ended 31 December 2023 (1H24), which has revealed a decline in new mortgages funded over the year.
Observing just CBA, there was a 15.3 per cent drop year-on-year in new mortgages funded, down by approximately $10 billion, from $65 billion in the half year ended 31 December 2022, to $55 billion in 2023.
When including the major bank’s subsidiary, Bankwest, new home loans funded also fell by around $10 billion, from $77 billion in December 2022, to $67 billion in December 2023, down by 14.9 per cent.
CBA’s new home loan funding has continued to shrink year-on-year when compared to the previous reporting period (even though it is showing signs of recovery). In the major bank’s financial results for 1H23, for example, there was an 18 per cent drop on the prior comparative period (1H22) for the overall retail banking group (CBA and Bankwest), while new mortgages funded by CBA alone dropped 23 per cent from 1H22 to 1H23.
The drop in new mortgages funded comes as the volume of loans written by the broker channel - which currently services 70 per cent of mortgage lending in Australia - plummetted at the major bank. The financial results revealed that just a third of all CBA's new mortgages were written by the broker channel, one of the lowest proportions on record and down from 42 per cent in the same period the year prior.
Indeed, when releasing its results for the first quarter of the 2024 financial year, the banking group revealed it had shifted its focus onto proprietary distribution. Prior to that, CBA had begun investing in broker services for Bankwest following branch closures in the Perth metro area and seemed to be focusing its broker relationships in that part of the group.
Reacting to the major bank’s shift in focus at the time, Finance Brokers Association of Australasia (FBAA) managing director Peter White AM said CBA had “turned its back on brokers”.
What kind of loans are being written?
The proportion of home loans on variable rates rose to 96 per cent in 1H24, up from 94 per cent in the six months to June 2023, and 92 per cent in the six months to December 2022.
The proportion of new owner-occupier loans fell to 64 per cent, down from 68 per cent in June 2023 and 71 per cent in December 2022, while new investment loans rose to 36 per cent, up from the 32 per cent recorded in June 2023.
New interest only home loans also rose slightly, up to 21 per cent in December 2023, from 20 per cent in June 2023.
CBA chief financial officer Alan Docherty said during a market briefing webcast (14 February) that the major bank has made a choice to “not participate in unprofitable mortgage lending” which shows up in the “divergence between balance share and revenue share over the past year”.
CBA’s total mortgage book has seen some recovery according to the most recent statistics on authorised deposit-taking institutions (ADIs) released by the Australian Prudential Regulation Authority (APRA).
As of December 2023, the major bank recorded its second consecutive month of mortgage book growth following decreases in its loan book from July to September before it held steady in October and rose in November.
CBA’s 90-plus day consumer arrears have increased over recent months; however, they still remain at historically low levels, with arrears for home loan customers increasing to 0.52 per cent during this period, up from the 0.47 per cent in the six months to June 2023.
[RELATED: All 4 majors see loan book growth]
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