Mortgage groups seem to be concerned by the thinning competition reports the Mortgage and Finance Association. According to the association, the major banks are thinning competition in the home loans sector. In other words, the banks are making the best use of the situation to meet their own ends. This is the reason many home loan rates have been rising and which is why mortgage groups are concerned by thinning competition.
Why is mortgage group concerned by thinning competition? The four most prominent banks in Australia are funded mostly by the deposits of their clients. On the other hand, private and non bank lenders depend mainly on the general funding market. Yet another important factor to be noted is that the general funding market has become very costly in view of the credit crisis in the global arena. The Mortgage and Finance Association’s Chief Executive Officer, Phil Naylor on the World Today program aired by ABC Radio said that private and non bank lenders are fading out of the housing loan market thereby paving way for the banks to strengthen its position. This has therefore lead the mortgage group to be concerned by the thinning competition. According to Phil Naylor, the situation is so grim that in the near future the non banks may not even consider foraying into the housing loan sector. Due to this, he feared that the banks could have a lot more power in watering down competion within the housing loan loan market.
Though he denies acknowledging the fact that the situation has indeed arrived, Naylor has issued a warning that this could happen in the future if nothing is done to recitfy the situation now. According to Phil, the non banks will be coerced out of the housing loans business. If this is to happen the banks would not have any competitors and would become more too strong. In the mean time, a sentiment among the banking analysts that prevails is that the prominent banks are taking advantage of the universal credit crisis and its impact on the high cost of funding to boost the interest rates on their home loans. Banking analysts have also time and again stressed that the mortgage groups are really concerned by the thinning competition.
On the other hand, the ANZ and the Commonwealth Bank has recently raised their interest rates. This move has indeed surprised the industry analysts because the Reserve Bank held back the official interest rates for this month. Peter Rice of the BBY Stockbroking had also insisted that the major banks have taken advantage of the exit of the non banks and private lenders from the housing finance business.
In the World Today program relayed by the ABC Radio, Peter Rice said that banks short of competition in the housing loans sector are cashing in on it. According to him, there is not one iota of doubt that the funding costs have raised beyond the expectations and it reached its peak in the month of January. In fact, funding margins have started to cool off in past few months, he added. From this it is evident that Rice also echoes the sentiment that the mortgage groups seemed to be concerned by the thinning competition that is taking place here. This has created quite an impact on the housing finance sector. It is hoped that all necessary measures would be taken to ease this anxiety very soon.