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THE LAST few weeks have seen Australia’s biggest banks stepping up to the plate to deliver a spate of policy and pricing enhancements to the market.
The question, however, is this: does it mean genuine competition has returned to the market?
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A recent senate inquiry into banking competition sparked an immediate reaction from lenders. NAB and ANZ were quick out of the blocks, announcing they would scrap exit fees. Westpac and CBA stood their ground.
As we move further into 2011, things are clearly hotting up.
All the majors now offer maximum LVRs of 95 per cent, a clear indication that the biggest banks are open for business. A raft of discounts and incentives has also been unveiled to entice borrowers into the fold.
This surge in activity is, however, by no means confined to the majors.
Citibank has been pushing hard for a greater share of broker business over the past six months and the bank recently dropped its rates to 6.95 per cent for borrowing under 70 per cent LVR on their basic product.
Other second tier lenders are also upping the ante: Bankwest is beefing up broker commissions in coming months; Macquarie Bank is cutting settlement fees from the bank’s classic loan; and ING DIRECT is dangling an extra 0.35 per cent discount to higher loan amount borrowers.
But again, the key question is whether this surge of policy tweaking and price trimming amounts to a return of competition, and the answer would probably be no.
An easing across the banking sector would be welcomed by brokers and borrowers alike. But there is little pressure on the banks in the absence of sustained support for the true drivers of competition: the non bank sector.
True, brokers remain squarely and defiantly behind the non banks. The Adviser’s sentiment survey consistently shows 80 per cent of brokers plan to recommend a non-bank product in the coming quarter, but volumes for the sector would indicate these good intentions fail to translate into business.
For borrowers to see a genuine, major improvement in lender competition, there would have to be a significant pick-up in volumes for the non banks. For now, that looks like it might be a challenge.
Nevertheless, Australia’s top originators are still thriving and while not every group has seen growth in recent months, clearly the sector is gaining traction. Securitisation is beginning to recover, and that will provide a welcome boost to funding.
