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.
The intense battle for market share that is being waged by Australia’s big four lenders is being criticized by investors, who fear that the increasingly bitter battle for customer hearts and minds will inevitably lead to pressure on profit margins and result in downgraded earnings.
Banking industry analysts and fund managers are increasingly of the belief that the fierce competition between the big four lenders will only intensify going forward, reducing their earnings as each lender seeks to defend its market share with tit for tat cuts to either interest rates or fees.
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 NAB has launched an all out assault on its big four rivals, urging customers to dump their banks.
NAB escalated what appears to be an intensifying war between big four lenders for borrowers. The lender is estimated to have spent several million dollars on its campaign which was launched on Valentine’s Day and using the slogan which appeared in several newspapers which said “It’s over between us.”
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.