St George woos business borrowers

As banks continue to offer sweeteners to entice home loan customers, St George has upped its proposition to business banking customers.

The bank is offering business borrowers a pay back of up to 0.5% of the size of their business loan to switch to St George, up to $50,000. The move comes as new RBA figures show business lending fell 01.% in January, and 2.4% over the past 12 months as demand for business finance flagged. St George COO Andrew Moore has told the Australian Financial Review the Westpac-owned bank is looking to expand its business customer base, along with growing residential lending.

"We are looking to acquire new customers, which is a bit of a change from the approach at St George over the last few years, which have been dominated by the merger with Westpac and the global financial crisis," Moore said.

Moore said recent competitive moves among the banks signalled a fight for market share in an environment of waning demand for credit.

"Competition, whether it is in the home loan market, deposits or business lending, is as strong as it has ever been. Post-GFC, we are in a lower credit growth environment. To win business at the moment, you need to really fight harder for it and when there is low credit growth you have to take customers from competitors," Moore remarked.

A St George spokesman told Australian BrokerNews the business banking initiative will be available to borrowers who apply for new business finance of $250,000 or more by 31 July, and open their primary business transaction account with St George.

"The 'up to $50,000 towards switching right now' covers the cost to us of waiving your business finance establishment fees and the eligible costs to you of moving your business to us, in total up to 0.5% of the total amount of your new business finance, or $50,000 whichever is the lesser," the spokesman said.

St George has also made moves to intensify its residential mortgage lending, raising its LVR from 90% to 95% for new to bank customers and offering a 100 basis point discount off its standard variable rate for the first year of its Introductory Rate Home Loan. The bank has also tried to woo brokers by returning to paying trail commission on loans between 30 and 60 days in arrears.

(Source: Adam Smith | 28/03/2011 5:00:00 AM www.brokernews.com.au)

Proposed ban on exit fees becomes law

The federal government’s proposed blanket ban on exit fees was passed into law yesterday sparking anger across the mortgage industry.

The original plan to ban exit fees was tabled last year when the majors moved above and beyond the Reserve Bank of Australia.

Treasurer Wayne Swan hailed the new law, which will apply to all new home loans from 1 July, as a victory for Australian families.

“Exit fees can be so high that they completely wipe out the savings from switching to a cheaper mortgage with another lender,” he said.

But it seems not everyone feels the same way as Mr Swan.

Speaking to The Adviser about the government’s decision, Smartline’s executive director Joe Sirianni said the new law would hamper, rather than promote, competition between mortgage lenders.

“The banks will come up with different ways of recouping the fees. The ones that are really hurt by this law are the smaller banks and non-bank lenders,” he said.

“The mortgage industry has warned the government time and time again that this move would do little to stimulate competition, but they just haven’t listened, which is very disappointing.”

Mr Sirianni said it would be interesting to see how lenders react to the news and what the non-bank lenders will do.

“We will just have to wait and see what happens,” he said.

(Source: Jessica Darnbrough, Thursday, 24 March 2011 www.theadviser.com.au)

The Smaller the Fish, the Bigger the Appetite

Throughout most of 2010, it was clearly demonstrated who had the biggest appetite out of the major four lenders. Westpac and CBA were not aggressively chasing new mortgage business whereas NAB and ANZ were generally hungry for new business. Recently, CBA has changed its appetite and is now keen to grow its mortgage book. NAB is still trying to buy new business (with its low standard variable rate). I think we’ll continue to see lenders jostle for position during 2011.

Interestingly, we have noticed some relaxation of credit policy over the past few months which results in lenders extending higher LVR’s and/or increasing their lending capacity. This is a good sign for borrowers.

I am quite optimistic for the lending market in 2011. I think we’ll see increased competition from non-Big 4 banks and more competition in the marketplace putting customers back into the driver’s seat.

Lack of Competition - What does this mean for you?

If you are with CBA – it’s time to review your home loan for a better rate. You can save thousands by considering a move to another lender. CBA were spanked in customer satisfaction surveys recently, however the service and rates won’t improve until they get hungry again.

Westpac – They have the biggest market share at 27% of all home loans. They bought St George and have had a full belly since November 2009 when they moved their rates up 0.5% and became non-competitive. Still overpriced in home loan rates and not looking to change.

NAB – Super hungry. They had no major acquisitions, only buying smaller organisations such as Challenger, and a stake in a mortgage broker group such as FAST. NAB is now relatively small to CBA and WBC, and very hungry for business. They offer the better rates of the majors.

ANZ – Mildly hungry. They want to grow fast to keep up with the joneses. ANZ have been keeping out of the headlines, offering some decent rates, however they will keep rates low to buy market share. On the policy front, ANZ reduced LVRs post-GFC, however had increased them back to 95% LVR to gain market share again.

The top 4 banks hold an 83% market share of the loan market.

There are plenty of other lenders (another 40) which provide the other 17% of all loans, however they are so insignificant to the major four banks, it’s like comparing a giant with an ant.

So, for the foreseeable future, expect much of the same from the major lenders with small improvements in lending policy. With a gross lack of competition, the major banks call the shots on fees and rates, with only one impedance...Government reform. Read about these reforms in our next interest rate bulletin.

(By Anton Hamer)

Buyers to win as bank battle breaks out

Investors’ financing options are widening as competition between the big banks fires up.National Australia Bank kicked off the war between the majors with its Break Up campaign this week, which is attempting to show consumers it is not ‘in bed’ with its competitors.

As part of its blitz NAB is offering to pay the mortgage exit fees of clients of the Commonwealth Bank and Westpac looking to make the switch.

Meanwhile, Westpac has responded with rate cuts of as much as 0.80 per cent on some of its selected home loans taken as part of its Premier Advantage Package.

Kristy Sheppard, spokesperson for Mortgage Choice, said conditions were looking healthier for borrowers however she warned buyers must be cautious of switching lenders and ensure they are completely aware of the true benefit versus cost equation.

“It will benefit many consumers by heightening their awareness of the wide variety of home loans and lenders available,” she said.

“Let’s just hope they look beyond fancy marketing campaigns and understand the true value of any incentives.

“Our advice is to focus on comparing the real substance of home loan products available today. The benefits of switching must outweigh the overall cost of doing so.”

Ms Sheppard said the new offers would stimulate borrowers to reconsider their financing arrangements.

“Mortgage Choice is already observing a significant spike in borrowers researching their options. Our website’s unique page views for refinancing-related content have jumped 25 per cent on the same period in 2010 and 14 per cent on last month.”

(By:Kate Miller www.spionline.com.au, Wednesday, 16 February 2011)

Low-docs halved under NCCP

After a resurgence last year, low-docs are on the decline according to mortgage broker Loan Market, shutting some borrowers out of the lending market.

The company has released research indicating low-doc applications have fallen by half, accounting for only five percent of overall loan lodgements. Before NCCP regulations introduced on 1 July of last year, the loans accounted for 10% of Loan Market's lodgements. Chief Operating Officer Dean Rushton has put the decrease down to lender caution following NCCP legislation.

“Under the new NCCP legislation, lenders are being more cautious when lending to the self-employed and small business owners who, unlike PAYG borrowers, do not have straightforward pay slips or group certificates to verify their annual income. As a result, many hard working self-employed people and small business owners are finding it harder to get finance,” he commented.

Homeloans Ltd general manager of operations and funding Scott McWilliams agrees, and has told Australian BrokerNews NCCP legislation may shut some borrowers out of the market.

"I think a number of lenders still believe that under NCCP, a low-doc loan is not eligible. Their argument would be that a low-doc loan may not demonstrate sufficient enquiry to see if the borrower can service the loan," he remarked.

Rushton believes the falling lender appetite for low-docs in the face of NCCP regulations will hurt many small business owners.

"Small business owners are already struggling with the impact of successive rate rises on retail sales, and are now being hit with tougher lending conditions," Rushton said.

According to McWilliams, small business owners seeking low-doc loans may not be the only borrowers to be shut out of the market by NCCP.

"I'm afraid we're going to return to the situation we had 20 years ago where a number of borrowers could not source housing finance because they did not fit within the very narrow box of what banks considered a good credit risk," he remarked.

(By: Adam Smith, 17/02/2011 )