Murray Inquiry should foster mortgage competition: Deloitte

by Calida Smylie04 Mar 2014
The Murray Inquiry may help the mortgage broking and superannuation industries to integrate better and ‘level the playing field’ within the mortgage market.

An annual mortgage industry report by Deloitte Financial Services concludes an important factor which will influence mortgages over the foreseeable future is the Financial Systems Inquiry, which is due to deliver its final report in December.

The two largest engines in Australian financial services are mortgage lending with $1.3 trillion and superannuation with $1.5 trillion.

The inquiry needs to explore how these two significant systems can better interact at a macro and a micro level, and presents an “exciting” opportunity for financial services to be more integrated, Deloitte Banking partner Graham Mott said.

“To be able to allocate greater levels of superannuation money to fixed income as an asset class and away from the dominance of equities would be a good thing for the banking sector and competition, as it would support a more vibrant securitisation market.”

According to Deloitte, the potential lack of competition and what regulations the mortgage industry can create to ‘level the playing field’ should also be examined by the Murray Inquiry, and will have an effect on the mortgage industry this year.

Competition will continue to ramp up over the next year as new online lenders and non-financial services players seek to enter the mortgage market, said Mott.

“While newly originated loans are still delivering a healthy 200bps of NIM for the majors, banks have had to deepen their discounts to customers and increase their commissions to brokers to compete for new flows in the market. And while some heat has come out of the deposit war, any equities market rally could put upwards pressure again on deposit rates for banks,” he said.

“As Australia leads the world to position for growth and the nation looks to the financial services sector to finance its future, the need for Australia’s $1.3 trillion mortgage market to have the agility to deliver earnings in a volatile market, is paramount.”

The inquiry will also likely look at housing affordability and the challenges faced by first home buyers entering the market, and at the other end of the age spectrum, the growing longevity challenge with many retirees living the traditional ‘asset rich, cash poor’ lifestyle, and having little incentive to downsize from the family home.