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Major banks concede price advantage

by Staff Reporter11 minute read
The Adviser

After months of sustained media negativity directed at the non-bank sector over higher funding costs, the major banks could now face a consumer backlash with two of the big four announcing rate rises last week.

A 0.12 per cent rise in NAB’s standard variable home loan rate plus ANZ’s 0.20 per cent rise to its standard variable rate home loans – both on top of the RBA’s November rate rise – looks set to trigger a wave of interest rate rises by other banks.

A consumer backlash would be welcome news to the non-bank sector, which lost valuable market share to the banks over the latter part of last year.

December ABS figures revealed the number of owner-occupied dwellings financed by non-banks continued to fall – by 13.5 per cent in October and 10.1 per cent in September.

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But with the banks’ price advantage being eroded, and widespread criticism over the timing of recent rate rises, many in the non-bank sector are hopeful a more level playing field will be achieved in 2008.

“The banks have been absorbing costs and using this time to gather in as much business as possible. Consumers however will start to look at the non-bank sector again now that rates are more even,” said managing director of Australian Secured and Managed Mortgages (ASMM) Suzanna Asciak.

“The non-bank sector should slowly start to see figures rise as consumers move away from the banks,” she said.

Carrington National’s director of sales and marketing Fernando Lemos said it was a matter of when rather than if banks would react to higher funding costs.

“From a [bank’s] shareholders point of view, you want to be as profitable as soon as possible,” Lemos said.

Lemos said the summer holidays had given the banks the perfect opportunity to raise rates without attracting too much media attention – a move that appears to have backfired.

“Consumers will now come to the realisation that it doesn’t matter whether you deal with a bank or a non-bank lender – everyone seems to have some sort of exposure to raising funds in the capital markets at this point in time,” he said.

 

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