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At the end of 2010, the federal government sought to improve competition among lenders in the mortgage market by introducing a package of banking reforms. This month we ask…
Do you think the government’s proposed banking reforms will benefit Australia’s smaller lenders?
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JEREMY FISHER
1st Street
The government’s proposed banking reforms are unlikely to create much change in the industry. Ideally, they would provide consumers with greater choice and smaller lenders with greater funding support, but that is in an ideal world. Ultimately, I believe the major banks will continue to dominate the market based on their sheer size and customer loyalty, while the removal of exit fees – established to support smaller lenders – will leave the smaller lenders struggling to replace the needed funds.
DONALD YUM
Iwision Finance Group
Definitely not. Westpac’s return to the top of the lending pack indicated that major banks can successfully bounce back from the GFC or any other issue, while smaller lenders and non-banks are yet to provide any such evidence. The proposal understandably concerns non-bank lenders, and I feel smaller and non-bank lenders will face even greater challenges than in the past. The removal of exit fees will force non-banks to lift their fees elsewhere, rendering them uncompetitive, which doesn’t favour consumers, the industry or lenders.
DESLIE TAYLOR
Mortgage Choice
The reforms let consumers move from the majors to smaller lenders, but removing exit fees does not remove the high costs associated with refinancing. For a dramatic transition to occur, smaller lenders will need to offer consumers incentives through promotions and competitive pricing. But I think smaller lenders will find it tough to remain competitive if the proposal is passed in its existing state. Indeed, the proposed reforms would only lead to the increase of fees in other areas of the lending industry.
ANITA MARSHALL
Advanced Finance Solutions
I expect the proposed government reforms to overhaul the industry’s customer service offering. Banks will place greater emphasis on customer relationships to combat the removal of exit fees and the freedom of choice customers have been awarded. Banks understand that removing exit fees offers customers better access to refinancing options, which could lead to greater competition. That said, I remain doubtful that the proposed reforms will live up to expectations.
MAX IVANOFF
Mortgage Fair
While any attempt to create more competition is a positive thing for the industry, consumers will face higher financial costs as the banks will raise their fees in other areas. Meanwhile, smaller lenders, who depend on exit fees, will struggle in the market – ultimately damaging market competition. I see very little change that will come of these proposed reforms.
