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While there's now little difference in the interest rates offered by the major banks, second tier and non-bank lenders, brokers believe that competition has yet to return to the market.
According to Mortgage Business’ most recent straw poll, 80.3 per cent of brokers thought competition among lenders had not improved.
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Of the 390 respondents, just 17.4 per cent said competition had improved while 2.3 per cent were unsure.
The December rate rise saw pricing open up between the major lenders, with a 27 basis point spread between the lowest and highest variable rate offered.
Some second tier and non-banks lenders announced just small increases to their variable rates following the RBA’s decision to hike rates in December, making many of their products competitive with those of the major’s.
Westpac, for example, increased its variable rate by 45 basis points to 6.76 per cent, while Australian First Mortgage pushed its up by 25 basis points to just 5.99 per cent.
Justin Bird, director of Perth-based brokerage Westminster National’s told Mortgage Business that while opportunities were beginning to emerge for non-bank and second tier lenders, many brokers were yet to take advantage of them.
“I don’t think we have seen any improvement in competition, and this has a lot to do with the lack of funding,” he said.
“The majors hold the lions share, and they know this, which is why they feel they can move out of step with the RBA and not suffer any repercussions.”
WHO Finance’s co-principal Michelle Coleman said the decision by three of the majors to move above the RBA should inspire non-bank lenders to get back into the market place.
“Westpac’s decision to raise its rates by 45 basis points will encourage non-bank lenders to believe that they can compete in the industry again,” Ms Coleman said.
“While we haven’t seen a great deal of non-banks and second tier lenders make their mark on the industry of late, I believe it is starting to happen and we should see increased competition heading into 2010.
“The non-bank industry is great. They offer friendly service and they need to know that when they return, the broker market will support them.”
Advantedge’s general manager of distribution, Steve Weston, said NAB’s acquisition of the Challenger mortgage management business should help many of the smaller lenders to easily access funds.
“I believe the non-banks will claw back some of the market share that they lost during the financial crisis, helped by Advantedge and greater access to competitive funding,” he told Mortgage Business.
“I believe we have seen an increase in competition just in the last few weeks and I think this will only improve as we head into 2010.”
