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Jessica Darnbrough
A lack of competition in mortgage lending has enabled Australia’s banks to avoid passing on the full 50 basis point RBA rate cut, Mortgage Choice’s chief executive Michael Russell has claimed.
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Speaking to The Adviser, Mr Russell said while increased funding costs are an ongoing problem for Australia’s banks, they have at least been able to recoup these costs quickly and easily from consumers without fear of repurcussion due to the lack of competition in the market.
“In the past nine years, we have seen the bank's share of all new mortgages increase from 77 per cent to 93 per cent and the reality is we shouldn't look to them to lay blame.
"This has occured as a consequence of the GFC and the failure of government and regulators to provide the necessary protection for non-bank lenders and the stimulus required to underpin a competitive and healthy mortgage market. At the end of the day, the competitive lending landscape that consumers enjoyed for the 20 years leading up to the GFC has been significantly eroded,” Mr Russell said.
Mr Russell said the government had failed on more than one occasion to reintroduce competition in the mortgage market.
“Wayne Swan talked up the creation of a fifth pillar, but that never eventuated. And his competitive and sustainable banking reforms package has to be one of the government’s greatest failures. The resultant decision to abolish exit fees failed the customer by failing to inject competition into the market.
But while the lack of competition in the mortgage lending space is ultimately hurting mortgage holders, Mr Russell acknowledged there is no “easy fix”.
“The stability and strength of our banks have definitely helped put the Australian economy in good stead in comparison to the rest of the world, so a solution to re-igniting a competitive landscape will take time, effort and resources to formulate. That said, this journey needs to commence sooner rather than later,” he said.
