Once the dust from the on again, off again big bank relationship saga settles, the Federal Government should have a far clearer picture on the immediate issues required to increase competition in the home loan market.
The current marketing ploys by the banks will not deliver tangible long term benefits for new customers according to Paul Ryan, CEO and Founder of intouch Home Loans, an independent non bank lender.
“The Government needs to understand that just 3 months ago the banks all increased their interest rates significantly above the RBA citing increased cost of funding. Yet in a small space of time they have declared record half yearly profits, increased their net margins and entered into a discount marketing war to attract new customers.”
Mr Ryan believes that the war chest subsidising this new customer acquisition is being derived from the bank’s existing customers, who should now consider the existing non bank lending options that already exist.
“Australians don’t like to be seen as punching bags and they can see through this marketing smoke screen,” Mr Ryan said. “What they need to now understand is that there is a viable non bank lending alternative offering better rates and an easier to understand more transparent service.”
However while the big banks are enjoying competing with each other the Federal Government banking reforms are doing little to increase the level of competition to keep the banks honest, warns Mr Ryan.
“The Government seems to be fixated on exit fees as being the major deterrent to why consumers are unable to refinance to a lower rate,” said Mr. Ryan. “This isn’t the case. The real elephant in the room is the double payment of mortgage insurance a customer is subjected to any time they look to borrow above the 80% of the property value.”
Mr Ryan believes that first home borrowers who took advantage of the Government’s first home buyers grant and obtained 100% finance from the banks will particularly be at the mercy of the banks.
“The exit fee won’t be the deterrent, it will be because they are required to pay for mortgage insurance again, a premium up to 2% of the loan amount,” said Mr Ryan.