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ISCOVER
Mia Santoromito
Heavy price discounting may be stimulating customer activity now, but it will cease to be effective over the long term.
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According to the latest J.P. Morgan/Fujitsu Australia Mortgage Industry Report, banks that adapt to changes in consumer preferences will ultimately be the big winners.
“We believe the current pricing is about as competitive as it can get prior to diluting profitability. In this type of environment, retaining existing higher margin customers is imperative,” J.P. Morgan banking analyst Scott Manning said.
According to Mr Manning, banks will need to look at ways to better identify and respond to customer preferences through a mix of access alternatives.
“Banks will have to look at using full service branches, agencies, kiosks, ATMs or online services.”
Mr Manning’s comments echo Advantedge’s Brett Halliwell, who yesterday told The Adviser that mortgage discounting would eventually come to an end and many lenders would be forced to rethink their pricing structure.
Over the last two months, almost all of Australia’s lenders have slashed the interest on their fixed rate products, with CBA, ANZ, Westpac and NAB carving up to 20 basis points off their respective fixed rates.
Earlier today, Westpac announced it would offer new home buyers a $1,000 cash back incentive.
Not to be outdone, CBA announced last month that it would beat any hot mortgage offers advertised by the other majors over the month of October.
“We will see the competitiveness change dynamic – whether that is in the form of rate rises outside of the RBA or the reintroduction of fees – the current dynamic will have to change,” Mr Halliwell said.
