The MFAA claims Federal Government banking reforms announced yesterday will result in less consumer choice, not more.
In a media statement, MFAA CEO Phil Naylor said "on the surface" the package appears to deal with competition issues, but does not address the root cause of lack of competition - a reliable source of funding for non-bank lenders.
In fact, Naylor said non-banks will be "dinstinctly disadvantaged" by a ban on exit fees for new mortgages from 1 July 2011.
“It’s important to note, non-bank lenders have been able to offer consumer very competitive interest rates by deferring some of their set-up costs into deferred established fees which are paid only if there is an early termination of the loan," he said.
Naylor added that non-bank lenders were the most heavily affected by the GFC and are still recovering, and that "it is futile to establish mechanisms to enable switching if there is no viable and competitive alternative to switch to".
“The reality is that exit fees may in fact be replaced by establishment fees making it harder for consumers to get a home loan,” he said.
However, Mortgage House managing director Ken Sayer disagreed with Naylor, saying that removal of exit fees in isolation will not adversely affect non-bank competitiveness.
However, he said overall the announcement stopped short on crucial issues, and will only have a short-term impact, rather than providing Australians with a sustainable model.
Fresh from a trip to Canada, where he attended the Canadian Association of Accredited Mortgage Professionals (CAAMP) conference, the MFAA's Naylor also said Australia had missed a "golden opportunity" to develop an Australian version of the Canadian Mortgage Bonds systems, which Naylor said enables thriving and competetive non-bank lender sector to operate there.
He labelled the Government's promise to inject an extra $4bn in securitisation funds "a mere drop in the ocean", which does not deal with the long run competetive funding needs of the non-bank sector.
“The Federal Government’s investments pale to those made by the Canadian Mortgage and Housing Corporation which during the past three years has invested $300bn in the National Housing Act Mortgage-backed Securities and Canadian Mortgage Bonds programs.”
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