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Credit crunch 'pushing non-bank lenders out of market'

Credit crunch 'pushing non-bank lenders out of market'

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Date Published : Monday, August 04, 2008

Increasingly high borrowing costs caused by the global credit crunch are pushing non-bank lenders out of the loans market, according to a report from consumers' organisation Choice.

The study, cited by the Age, shows the exodus is killing off competition for consumers and as a result, the major banks are consolidating their hold on the low-documentation loans sector.

The publication adds that new figures from financial research firm Cannex show the number of low-documentation products fell by 15 per cent in the first seven months of the year.

Furthermore, the number of lenders in the loans market declined from 46 in January to 38 in July.

Companies that have withdrawn from the sector include investment bank Macquarie Group, Virgin Money, Bluestone and Ironbark Mortgage Solutions, HSBC said.

Cannex financial analyst Joshua Zenas said: "People are finding it risky to lend ... based on what's happening on the capital market."

Choice spokesman Christopher Zinn believes consumer could miss out if competition continues to dry up.

"The rise of the non-bank industry led to a lot of price and terms of conditions competition and new products, which was terrific for the consumer," he said.

"Our fear is that without competition from the non-bank sector, it does allow the banks far more freedom to further their interests."

Choice is part of the Australian Consumers Association, the largest group of its kind in the country. The organisation is an independent body that reviews and rates over 200,000 different products.

According to Dollars and Sense, the average Australian has personal debts of $32,500.

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