Non-major lenders and non-bank lenders will be able to compete more aggressively with major banks to gain market share this year, according to Deloitte Financial Services.
Despite settlements on a monthly basis exceeding $28 billion across Australia at the end of last year – the highest single month of settlements on record – the $1.3 trillion total market for outstanding loans had only modest growth of 5% throughout 2013, said Deloitte in its annual mortgage report.
This implies the majority of ‘new’ settlements coming into the market are from existing borrowers and is not reflecting first home buyers coming into the market.
Deloitte said this means non-major lenders, and non-bank lenders that have access to funding, will be able to compete more aggressively with major banks to gain market share in 2014.
“Given their weighting to the overall system, the major banks are facing the pressure of their portfolios only growing at 5%, but having to compete for ‘new’ settlements with increased discounts and commission bonuses to brokers. This will continue to place pressure on interest margins for the major banks.”
ME Bank broker general manager Stewart Saunders told
Australian Broker the ability of non-major and non-bank lenders to compete more aggressively will come in part from the growth in lending opportunities – as consumer confidence drives greater demand for lending, and will be assisted by greater access to more competitive funding.
“The relative cost advantage that big banks have over other banks tends to come down a bit when funding conditions improve.
“As funding conditions improve our ability to compete will be assisted, particularly as demand for home loans increases.”
A subdued total credit growth environment makes for a more competitive environment, Saunders said.
“That suits ME Bank, which has been pursuing an ambitious growth strategy for some years. We’ve been honing our competitive approach and will continue to do so by being market-leading, but also customer focused and innovative with technology, among other strategies.”
This year should also prove to be a good one for brokers and refinancing, Saunders said.
“As competition increases and all banks including the major banks compete on price, there should be opportunities for existing customers to get a better deal. It therefore follows that banks will be under pressure to retain existing customers and there will be opportunities for brokers around refinancing,” he said.
“It also follows this retention pressure will be greatly felt by the majors, who hold 80% of home loan market.”
ING Direct distribution executive director
Lisa Claes sat at the Deloitte roundtable when its mortgage report was discussed, and agrees non-major and non-bank lenders will be able to compete more aggressively this year.
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A slowing credit market in its various forms incites competition but that’s our game. That’s how we entered the market and we continue to compete by offering consistent value and service and that is something that really appeals – refinancing or otherwise,” she told
Australian Broker.
Year on year, ING Direct has always been a “true competitor” in the home loan space with a trusted brand, Claes said. However, the outstanding loan market being subdued may affect ING Direct and other non-majors in other ways.
“Some things to keep in mind is that the various stimuluses on offer compressed homebuyer demand into a very short space. Some of that dampening is still having an impact on current production,” Claes said.
“Today, affordability is clearly an issue being faced by many new homebuyers. The market stagnated for a while and in the past 9 to 12 months it’s taken off and is now out of reach for many first homebuyers while investors can more readily access this market.
“Interest rates being low and a relatively healthy Australian economy means the home market is the first place where that confidence becomes evident.”
More:
Strong growth despite pressure from majors
Non-majors fight harder for broker channel
Ex-broker head tackles clawbacks, vertical integration
