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The chief executive of Australia’s largest customer-owned financial institution has observed a ‘dampening of demand’ for mortgages.
Speaking to The Adviser, CUA chief executive Rob Goudswaard said competitive pressures and a plethora of pricing and policy changes in recent weeks could be cooling demand for housing credit.
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“We have noticed in the last month a dampening of demand for products generally,” Mr Goudswaard said.
“We are trying to interpret what that means. I think part of it has been the investment loan repricing,” he said. “But also we have seen a number of niche players go into the high 3s with their rates, which we haven’t done. I think relative to our competitors that hasn’t made us first choice when going to brokers.”
Brokers are a critical channel for the mutual lender, with 40 per cent of all CUA home loans originated via the third-party channel.
“We have a very clear market segmentation and it is a group of people – about $2 million of them in Australia – who live their lives such that they are very open to the mutual ethos and offering,” Mr Goudswaard said. “They tend to use brokers as much as they use branches for information.”
Mr Goudswaard said the biggest challenge for mutual lenders is that their capital is only enhanced by their profitability.
“We have a fine line to tread about the interests of our customers in the immediate term by pricing our products but also in the longer term for making a profit so we have enough capital for increased lending,” he said. “They are both for the customer, it’s just a time frame. The pricing is the now, the profits are to make sure we can have enough capital to keep lending.”
Mr Goudswaard conceded that over the last 12 months CUA has been “skewed towards the product side”.
“At some point there might be a need for us to be a little bit more conscious of increasing our profit to increase our equity for future lending,” he said.
Last week CUA announced a number of rate changes, including a 14-basis-point cut to one of its variable rate home loans for owner-occupiers, effective 24 November.
The lender also confirmed that some other variable home loan rates would rise as of 24 November.
Mr Goudswaard said CUA’s investor rate needed to move in line with the market to ensure the lender could continue to manage its investor lending growth.
He also noted that as a mutual, CUA’s costs reflect that it holds much higher levels of capital than the majors are being required to hold.
[Related: CUA announces variable rate below 4%]
