More than meets the eye to banks' RBA break-up766 people have read this article
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| Friday, 17 February 2012 |
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By: Michael Russell, CEO Mortgage Choice The latest round of interest rate rises has effectively changed forever the framework of mortgage lending in Australia to the extent that borrowers have not yet realised the full impact. The major banks have now clearly informed their customers that going forward they will move interest rates out of cycle with the RBA. In fact not only will they be moving independent of the RBA, they will also now move independently of each other. This means that while their standard variable rates (SVR) were, for a generation, on par with each other, they are unlikely to ever be so again. Increased funding costs, subdued credit growth and fierce competition for new customers has created this new normal in the world of retail banking. While the media and much of our competition have been consumed with the debate as to whether they would or should move independently of the RBA, the reality is they have and will. What we need to examine are the consequences for existing and future mortgage holders and the opportunities arising for professional mortgage brokers such as Mortgage Choice. Mortgage holders Prior to this latest round of interest rate hikes, there was a 14 bpt divide between the SVRs of the major banks. Today this divide has increased to 15 bpts – and that’s just the beginning: NAB 7.31% (+0.09%) ANZ 7.36% (+0.06%) CBA 7.41% (+0.10%) Westpac 7.46% (+0.10%) To make matters even more confusing for mortgage holders, each bank is now adopting a different discounting matrix, which as you know, is itself subject to ongoing and sporadic variation. This new normal for the banks will almost certainly leave existing and prospective mortgage holders even more confused than they were before. Mortgage brokers The unintended consequence of this new banking normal is that mortgage holders will now, more than ever before, require the assistance of a professional mortgage broker when applying for a new loan or having their existing loan reviewed for its ongoing suitability. As banks continue to be unpredictable with pricing their mortgage loans, customers will continually be drawn to the services and support offered by professional brokers. The way I see it, the service proposition for a professional mortgage broker has now taken on a whole new level of significance. As a regulated and licensed industry, the time is right for professional brokers to strengthen their position to Australians borrowers by providing the professional services they need to not only ensure they have the most suitable loans, but have them with the right institution. The challenge for us is to let them know we are here and ready to help them.
Michael has also spent several years as a small business entrepreneur, acquiring and selling a number of businesses. As Mortgage Choice CEO, he is responsible for managing the publicly listed company’s operations to ensure continued business growth and development. In doing so, Michael is the proud leader of Australia’s largest independently-owned mortgage broker. |
Michael Russell joined Mortgage Choice in April 2009 with over 20 years experience in the financial services industry and an in-depth knowledge of mortgage broking. Well-respected for leading Choice Aggregation Services over several years to impressive heights as its managing director, before it was acquired by Challenger Financial Services, he held earlier senior executive positions at ANZ Banking Group and National Mutual Royal Bank.
Comments
Banks are their own business, they set their pricing like every other business. The government can't set their pricing for them.
Also it's not an RBA issue, any regulation would fall under ASIC.
They do have some public responsibility given they use public money. ASIC could mandate that they all make their announcement at the same time, perhaps between 4pm and 5pm on the second Friday of the month. They can still be independant, but this is more likely to make lenders more compeditive as they won't copycat each other.
Banks should be regulated in this regard, and should not be able to increase rates when they feel fit.
RBA are the watch dog for rates, and this should remain.
Government needs to man up, and make it law for the majors to be inline with the RBA.
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