The mortgage industry’s peak association has warned borrowers that the major banks’ dominance in the home loan sector will eventually drive rates up.
According to the MFAA, recent ABS figures confirm that smaller lenders are losing ground to the big banks. Australia’s banks wrote 90.2% of all new loans in February – the highest rate since last September (90.6%). About 80% of all loans are held by the Big Four.
Meanwhile, market share for non-bank lenders has plummeted to 1.9% - its lowest level since they joined the mortgage market in 1995.
Credit unions and building societies held a market share in February of 7.9% - slightly less than previous months.
“These figures support our contention that the upcoming elimination of exit fees will not increase competition,” said chief executive of the MFAA, Phil Naylor.
“Most of the major banks have already dropped their exit fees ahead of government regulation and this has clearly resulted in a churning of loans among the major banks but to the detriment of non-bank lenders.
“On the basis of this trend, non-bank lenders will disappear when exit fees are totally banned in July. How can it be good for consumers when the most competitive lenders are forced out of the market?”
According to Naylor, non-bank lenders are synonymous with bringing down the margin on home loans in Australia, making them more affordable for all Australians.
“Those loans offered by Aussie and Wizard were built on the deferred establishment fee – it allowed them to compete with the banks.
He adds that without deferred establishment fees, competition will reduce and “Australians will eventually pay more for their mortgages”.
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