Blow for competition as mutuals squeezed
By
Tim Neary
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17/03/2010 12:00:00 AM
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3
comments
In a blow for hopes that competition is making a strong return to the mortgage market, the mutual industry body Abacus has said that credit unions and building societies are being hurt as deposit competition squeezes their profit margins.
Credit union profit margins fell from 17% in June 2007 to 11.2% in June 2009 - but had recovered to 16.8% by December last year, according to a report in the AFR.
Chief executive at Abacus, Louise Petschler attributed the impact to stiff deposit competition from the majors due to the higher cost of wholesale funding.
"This half we have seen margins squeezed, not for any reason other than Westpac and BankWest are being very aggressive with deposit rates and we need to compete," she said.
The sector's share of new mortgage business has fallen from around 8% to 5% over the course of the credit crisis, while market share dropped slightly to around 4.3%, according to the RBA and Australian Prudential Regulation Authority.
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Latest Comments
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3
comment(s)
James on
17 Mar 2010 11:50 AM
When are people going to realise that competition in mortgages is linked to competition in deposits? ie there are 2 sides of the balance sheet. If you can''t raise deposits, or can''t raise cost effectively, you can''t lend. On one hand the media cries poor on the lack of competition, but then lenders get criticised about too much competition in deposits? Am I missing something?
Broker Tony on
17 Mar 2010 01:07 PM
In one respect the loss of market share is good news. Most credit unions and building societies have withdrawn from the broker market and it should now be clear to them that if they want to be significant players they need support from brokers. Hopefully the penny will drop before they become irrelevant or extinct.
brizbroker on
17 Mar 2010 07:39 PM
Broker Tony- your point is noted but Credit Unions, Building Societies, Mortgage Managers and non banks alike HAVE supported brokers for years and years, but they cant stay in the channel if brokers dont support them back by writing good quality, regular business. There are several of these organisations that are well funded, have had good support from AOFM and still no one uses them. Brokers have had lots of good options aside from the big 4 on their panels throughout the GFC and ignored them. So what do you mean when you make statements like "support brokers"??? Product? Pricing? Processing? Policy? Payment? Do we want competitively priced and featured products from lenders other than major banks? We''ve got em. There are loads of them. Do we want good commissions? We''ve got em. Most the alternatives havent reduced comms as much as the majors. Do we want faster service without channel conflict? We''ve got it. Do we want to NOT be subject to volume requirements to maintain accreditation? We''ve got it. Tony, what else do we want?????? Im just asking, because it seems to me that lots of smaller lenders ARE supporting brokers but its a bit of a one way street. Seems a bit rich to knock them and ask them for more when as an industry we give them so very little support. If we want competition, we have to decide to foster it too.