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)
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