Banks have confirmed they are feeling the pressure of competition as one lender after another has cut rates in 2014.
The lenders that made cuts in April alone included AMP Bank, Bankwest, Citibank, Commonwealth Bank, CUA, Homeloans, P&N Bank, Pepper and Yellow Brick Road.
ANZ’s head of third-party relationships, Keiran Evans, said low interest rates and a strong housing market had been driving competition among lenders.
Mr Evans hinted that competition would remain strong, with ANZ economists expecting the official cash rate to remain at a record-low 2.5 per cent for the rest of the year.
ING Direct’s head of third-party distribution, Mark Woolnough, said lenders had displayed a renewed focus on acquiring new customers.
“The home loan market is very competitive and this will continue to be the case going forward,” he told The Adviser.
“Increased competition bodes well for many non-major lenders looking to increase their share of the mortgage market.”
ME Bank chief marketing officer Rebecca James said lender competition had been driven by lower levels of demand for credit.
“[The] pressure is on banks to find other ways to keep growth in line with their expectations, and hence we’re seeing banks use other levers, including cuts to fixed rates, cash-back sweeteners and a greater willingness to negotiate on variable rates,” she said.
“It’s also worth noting that for customers, lower rates always trump cash-back sweeteners over the long term.”
Pepper has noticed competitive pressures in the mortgage market for the past three years, according to Mario Rehayem, director of sales and distribution.
“The big banks continue to fight it out for market share which is great for some borrowers,” he told The Adviser.
Teachers Mutual Bank has also found the market competitive, but also full of opportunities for lenders, according to Mark Middleton, national manager of third-party distribution.
He said the trend of rate cuts was likely to end sooner rather than later, however.
“Rates are at historical lows, so unless there is an RBA trigger, we wouldn’t expect loan rates to go much lower,” he said.
“However, as always, market forces and competition will play an important role.”
Meanwhile, Bendigo and Adelaide Bank chief executive Mike Hirst has told Fairfax Media that fierce competition in the home loan market is creating a “race to the bottom” among lenders.
''When growth is low, there are always a lot of people who will resort to pricing into credit to put that forward as their point of difference,'' he said.
“We are seeing a bit of that emerging at the moment. In our view it's a race to the bottom.''