The end-of-year rise in interest rates posed the question of how competition will shape up in 2011. This month, we asked some of our Elite Business Writers for 2010...
Do you expect lender competition to improve in the year ahead?
Finance Made Easy
I believe competition is increasing and will continue to do so. Lenders appear to be more accommodating, obviously thinking if they don’t show a certain degree of flexibility their competitors will. Clients [have] a genuine interest in wanting to know more about ‘what’s out there’ other than the Big Four. Greater product flexibility, coupled with very competitive rates and willingness for non-bank and second tier lenders to take up the slack enjoyed by the Big Four post-GFC are all positive factors.
I think competition between the lenders in 2011 will ultimately remain the same as it is now. Yes, there’ll be changes to DEFs and changes associated with licensing and NCCP. This may result in product changes by some lenders – and it will be interesting to see these changes take place – but overall, the key players will remain as the Big Four, and they will continue to have market share in 2011.
IPS Home Loans
The government has stated it is implementing measures to decrease the cost of accessing overseas funds, mainly for smaller banks and Australian subsidiaries of overseas banks. If the smaller lenders are able to access [cheaper] funding, I would expect them to become more aggressive in order to wrestle market share from the majors. I hope some of the larger credit unions and building societies will see the mortgage broker channel’s value and join the panels of many of the aggregators.
Mortgage Solutions Australia
I believe lender competition will increase during 2011. Between the banks, competing mainly for volume has changed to competing for quality. Lenders are now looking for customers with strong serviceability, large equity/deposits, clear credit history and stable employment and residence. Some banks are prepared to offer larger discounts on their interest rates depending on the loan size. Having built up their margins in the last rate rise, they can afford to spend money chasing these clients.
Oracle Lending Solutions
I expect [competition] to improve as the non-bank lenders are providing great service and have great offerings. As a broker, these non-banks don’t provide any channel conflict and don’t cross sell everything to your client. They don’t have volume hurdles and brokers are moving away from the majors in favor of the non-banks.