Loan Market Group has called for a Federal Government review into the banking sector to closely examine ways of keeping competition alive among lenders as borrowers increasingly struggled to secure finance.

The Group, which includes X Inc Finance, the country’s fastest growing mortgage broker, said a shortage of liquidity in the Australian financial system in the wake of the global credit crunch was continuing to drive good quality lenders out of the market. As a result, increasing numbers of people were being denied mortgages.

Loan Market Chief Executive Officer Jennifer Nielsen said entire consumer groups such as mature people (reverse mortgages and non-conforming loans) and small businesses (lo-doc loans and non conforming loans) have simply lost the opportunity to borrow funds.

Ms Nielsen said that the dominance of major lenders was exacerbating the situation and the review by the Federal Parliament’s House Economic Committee, announced earlier this month, needed to focus as much on competition as on fees and charges.

“If Australians can’t get a mortgage in the first place because there are no competitive products available, they won’t need to worry about creeping fees and charges,” Ms Nielsen said. “Specialist lenders and building societies are leaving the market in droves, unable to secure liquidity with the credit crunch having pretty much shut down the mortgage-backed securities market.

“As more lenders exit the industry, market power will further concentrate in the hands of the biggest four or five lenders, making it even harder for deserving applicants to secure a loan,” she said.

Ms Nielsen said figures from the Australian Bureau of Statistics showed the big four banks financed almost 90 per cent of all home loans by value in February, the highest rate in 13 years.

“In contrast, I am sure Loan Market Group is representative of the broader mortgage broker industry in putting only 70 per cent of all loans to the major banks,” she said.

“This is a clear demonstration that, mortgage brokers are vital to keeping competition and fair choice alive.

“The marketing and propaganda of the major lenders doesn’t always present the complete story.”