Australian banks which have been charged in a report by investment bank Merrill Lynch with underestimating the cost of living for their customers, and as a result lending to much as they seek to maintain their market share, have dismissed the accusation.
The report published by Merrill Lynch earlier in the week suggests that Australian lenders have not factored in costs of living at a high enough level, resulting banks lending to customers who may later struggle as expenses begin to rise.
The central bank is warning that Australian lenders have begun to lower their mortgage lending standards as they seek to achieve the turbo charged pre financial crisis growth rates, an objective the RBA says is unrealistic.
The Reserve Bank of Australia says that as lenders compete for new mortgage borrowers, they were increasing their maximum loan to valuation ratios.
As competition intensifies in the market for mortgage lending, and funding costs ease, Australian lenders look set to relax credit standards for mortgage borrowers.
According to a report authored by UBS which polled both the major and regional lenders, banks have relaxed their underwriting standards over the last year as they seek to cling to their individual share of the mortgage lending market against a backdrop of intense competition.
John Symond, founder and executive chairman of non bank financial lender Aussie reckons that the government proposal to ban exit fees could result in some smaller lenders being forced to exit the mortgage lending market, resulting in a new wave of consolidation in the business.
Mr. Symonds has made his concerns to clear in a letter to the Federal Treasury in which he warned that smaller lenders, unable to absorb the cost of writing new mortgages may end up ultimately be driven out of business as a result of the proposals.
Australian banking major CBA is facing a backlash from its mortgage borrowers, after the lenders satisfaction ratings took another dip during January.
CBA’s poor result is the latest in a series of losses by the big four lenders, who have seen their efforts at winning over their customers through the cutting of fees undermined.
Australian banking major CBA has fired its first shot in an increasingly bitter battle between the big four banking groups, as the lender responded to NAB’s advertising campaign which aims to lure customers of its rivals by offering to pay their exit fees.
CBA is offering NAB customers as much as $1,400 in cash if they switch from the lender to refinance their mortgage, open an account and apply for a credit card according to Bloomberg News which cited an internal memo that the agency had obtained.
Gail Kelly, chief executive of Australian banking major Westpac has ordered a shakeup of its subsidiary St George after it emerged that the lender experienced a substantial slump in mortgage lending.
During Westpac’s first quarter trading update, Mrs. Kelly revealed that she was unhappy with St George’s current lending levels, particularly in its key New South Wales and South Australia markets.
Australian banking major Westpac has fired its first salvo in an emerging war in the market for home loans, after the lender launched an aggressive discount campaign on Tuesday as it seeks to win new customers and expand its market share in the face of more intense competition from rivals.
Australia’s second largest lender in the latest twist to an increasingly bitter battle for market share was responding to NAB’s revelation at the weekend, that it would pay the ext fees for CBA and Westpac borrowers who switch their mortgages to NAB.
Australia’s largest mortgage lender Commonwealth Bank of Australia, which has recently lost some of its market share has ambitious plans to rebuild its mortgage lending business, which is likely to trigger a price war in the market for home loans, as rivals who gained market share at CBA’s expense, seek to defend their gains.
CBA chief executive Ralph Norris whilst announcing the lenders first half results said the following a slowdown in mortgage lending, the bank had been writing more home loans in recent months. CBA, during the financial crisis was one of the most active lenders in the market as it sought to expand its market share at a time when others were pulling back, since then the lender has deliberately slowed the growth of its mortgage loan book.
Australian banking major National Australia Bank, which raised its interest rates by less than its big four rivals has managed to capitalize on that differential by increasing its mortgage lending market share, though as the expense of losing some of its deposits.
The Australian Prudential Regulation Authority (APRA) published December statistics earlier this week which showed that NAB has managed to capture some market share at the expense of its rivals with its “Fair Value” banking campaign.