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Battle For Mortgage Customers Intensifying
Australia’s largest lenders are aggressively competing for customers in the mortgage segment, cutting interest rates as the lending in the sector dries up. Fixed rates mortgage borrowing costs have fallen by as much as 2/3rds of 1 per cent over the last couple of months as ANZ, CBA, Westpac and NAB all seek new customers.
Canstar Cannex a research firm published data which suggests that variable rates have also fallen by as much as 15 basis points based on a $250,000 mortgage.
Mitchell Watson, a spokesperson for Canstar said that competition in the mortgage lending space is intensifying as the number of borrowers fall against a backdrop of a turbulent economy.
The largest customers, that is to say those with deposits or loans valued at over $500,000 typically get the best deals according to Canstar.
“They are fighting each other for new customers or to get people to switch. There is genuine competition between the majors as they clamour for business and try to drive people into the market.” Mr. Watson said.
Westpac recently reduced further cuts to its fixed rate offerings of as much as 0.2 per cent, with discounts of as much as 20 per cent on the first year of a mortgage for first time buyers.
CBA recently announced that it was willing to beat any advertised rate offered by its big four rivals until the end of the month on both variable and fixed rate mortgages valued at $100,000 or more.
According to Mr. Watson, fixed rate loans are now cheaper than variable rate loans, and offer a sense of stability, though Mr. Watson added that borrowers who exited the loan early faced stiff penalties, and also run the risk of higher borrowing costs should the variable interest rate fall in the future.
Loan Market Says Fixed Rate Mortgage Products Seeing Unprecedented Popularity
One of Australia’s top mortgage lenders, Loan Market Group says uncertainty in global financial markets has resulted in an unprecedented rise in demand for fixed rate home loans.
According to the company, Loan Market’s fixed rate product enquiries have risen to about 30 per cent, from virtually zero at the beginning of the year.
Loan Market’s announcement came against a backdrop of Australian banking major Westpac Savings Account announcing it would cut its lending rate on several fixed rate product offerings. Westpac cut its three year Premier Advantage product by 15 basis points, and its two year product by 20 basis points.
Dean Rushton chief operating officer of Loan Market says that Australian banks are getting increasingly competitive with their fixed rate offerings.
“Despite the prospect of a long overdue cash rate cut, consumers have been taking a close look at these highly attractive fixed rate packages on offer,” Mr. Rushton said.
According to Mr. Rushton, some fixed rate lending rates are nearly 150 basis points less expensive than Standard Variable Rates.
” Around the last RBA rate movements in November 2010, fixed rate products were sitting about 0.5 per cent higher than most variable rates,” he said.
The announcement comes at a time when one financial comparison website released its own figures which suggest that the Reserve Bank of Australia rate hike, followed by even larger rate hikes by retail lenders has had the effect of cutting the number of first time home buyers by as much as a third.
For the year ending in July, approximately 90,000 first time home buyers used a mortgage to finance their purchase, which was 40,000 less or about 31 per cent less than the same time period in the previous year.
The Reserve Bank only hiked interest rates once during that period, lifting the cash rate to 4.75 per cent from 4.5 per cent in November 2010. As soon as the central bank announced its decision, the big four lenders all raised their variable rates by more than the rate hike enacted by the RBA.
CBA Rated Worst Australian Mortgage Lender
After months of negative publicity regarding the gigantic pay package of departing chief executive Ralph Norris, and increasing dissatisfaction by its customers regarding the lenders out of step rate hikes, it comes as no surprise that worst rated mortgage lender is Commonwealth Bank of Australia.
CBA’s home loan rating dropped to 5.9 points out of a possible 10, down from 6.7 points in the previous people’s choice survey conducted by a financial comparison site.
Of the big four lenders, ANZ fared the best, registering a score of 6.7 points, with rivals NAB scoring 6.4 and Westpac rated at 6.2
What was most interesting about the results of the survey is that the smaller lenders continue to remain the favourite with ordinary consumers.
The Greater Building Society was the top ranked mortgage lender, scoring a 9.4, which in turn was followed by Members Equity Bank who received a score of 8.2, and CU who got 8.2.
CBA’s precipitous decline in approval ratings comes against the backdrop of its decision to raise its lending rates by 45 basis points in November last year, well in excess of the 25 basis point rate hike enacted by the Australian central bank.
CBA’s customer satisfaction ratings have plummeted in recent months, a trend which has cost departing chief executive Ralph Norris nearly $7 million in pay.
NAB’s much publicized advertising campaign which encouraged borrowers to jump ship for lower interest rates and fees appeared to help it obtain the best customer satisfaction rating of 7.1 amongst the big four. Westpac followed in second place with a rating of 6.9, CBA and ANZ were tied in third both receiving a rating 6.9.
ING Direct was rated the best, most trusted and recommended bank, whilst ME Bank was ranked as the lender that offered the best customer service.