Last week we asked readers to share their thoughts on whether the non-bank sector would be able to regain market share lost to banks and the RBA’s approach to monetary policy. Here are the pick of the comments.
On non-bank lenders:
“In the short term while the securitisation market in Australia is all but frozen I see no substantial increase in business for non-bank lenders. We have seen many financial institutions pull out of the mortgage market all together and I feel that there is more to come.
The main issue at the moment is that the majority of loans written by non-bank lenders are mortgage insured. The two main mortgage insurance companies in Australia are American owned and they have been hit hard from the US credit crisis.
This has caused the credit criteria to tighten and although broker introduced loans "in theory" are assessed the same as bank introduced loans, in reality this is simply not the case.
When will the cost of funds stabilise? 6 months, 12 months, 18 months? Until this happens we will continue to see the non-banks struggle and the big four increase market share. The big 4 now have ALL the power which is costing Australian home owners. The cost of funds has reduced from it's highs yet the banks have not reduced their interest rates and nobody can make them.
It is only competition from the non-banks that will see the big four reduce their rates and at the moment there is no real competition... And when it does return who would use a lender who exited the market during a crisis?” Nathan Daniell, Simplify Your Mortgage
“If ever there were a case for an Australian based and funded securitiser to be established it is right now. It is the only way that borrowers are going to keep the banks honest as well as providing brokers with a fair commission structure.” Peter Allen, The Mortgage Bureau
On interest rates:
The RBA will never admit it but they have blown it big time by increasing the rate 1% since August 2007. The last 4 increases were ill-advised and if any of the voting members looked beyond the shores of Australia before voting, the last 4 increases should never have happened!
They need to drop the rates at least another 0.75% ASAP or Australia will slip into a recession. If they don't and Australia does slip into a recession I think the Rudd Government needs to sack the lot and restaff the RBA with competent voting members.
But neither of those things will happen because the RBA is too arrogant and won't admit their mistake and the Government know less about economics then the RBA to argue the point.
So, my fellow Australians get ready for a recession that did not need to happen and was created by the RBA over reacting to something that was totally out of their control (the price of Oil!). Jim, Five Star Home Loans
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