Non-banks being 'squeezed out'
By
Adam Smith
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15/07/2011 6:00:00 AM
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2
comments
Banks have continued their lending dominance, with the MFAA claiming other players are being "squeezed out of the market".
The MFAA has pointed to ABS lending finance figures showing banks have taken a 92.5% share of the mortgage market, the highest since housing finance figures started being recorded in 1992. By comparison, mutuals accounted for 2% of mortgage lending, with non-banks writing the remaining 1.2% of home loans. The MFAA stated that the current landscape stands in contrast to 20 years ago, when mutuals made up 10.2% of the market, and the 15.2% share non-banks saw at their peak in 2003.
MFAA CEO Phil Naylor commented that the figures show government intervention is needed to stimulate sagging competition in the sector.
"This is an important part of the Australian economy and it is being dominated by one type of lender. The figures tell us that the non-banks are the most competitive when it comes to interest rates, yet they are being squeezed out of the market," Naylor comment.
Interest rate data backs up Naylor's assertion. The average standard variable rate among the four majors was 7.79% in May. Mutuals had an average SVR of 7.32%, whereas non-banks had the lowest average SVR, at 7.01%.
"History shows us that when non-bank lenders are thriving, borrowers pay less for their mortgages as well as have more choice in their lenders," Naylor said.
Naylor again advocated for the adoption of the Canadian securitisation model, saying the root of bank dominance was the lack of competitive funding sources for non-banks.
Related stories:
Non-bank sector now 'on its knees'
Non-bank market share halved
Latest Comments
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2
comment(s)
Ray Cooper on
15 Jul 2011 11:00 AM
MFAA for the last two years have supported strongly policies that favor the Banks, the Banks are the strongest supporters of the MFAA financially. His comments appear hypocritical.
King Wally on
15 Jul 2011 11:10 AM
The major banks are no different to the big Investment Banks in the US that ran Govt. $50b worth of credit card debts at 20% plus pa, who needs to make a margin on a mortgage, maybe we should be looking at a Glass Steagall type act that caps banks that provide mortgages and credit cards to 6.5% pa above the SVR on cards. Buy banks shares, surely no one could stuff up an Aussie major, money for old rope!