Mortgage competition 'will remain tight'

Tuesday 27 November 2012

Article by Mozo

Leaders at Deloitte believe competition in Australia's mortgage market will remain "tight" heading into 2013.

The organisation conducted a study to see how home loan providers think they will fare over the next 12 months.

Although the sector is worth in the region of $1.3 trillion, many Aussies are wary about taking on credit at a time when the global economy is still decidedly shaky.

As a result, mortgage brokers will find they have to offer something extra in order to attract new clients ahead of rival firms.

Deloitte stated that most banks should concentrate on improving the services received by their existing home loan customers, rather than solely focusing on new business.

"Leveraging existing portfolios – the back book – is the least expensive and most successful approach to maintaining residential mortgage market share and earnings. More so than competing aggressively for new customers," commented Deloitte's financial services partner James Hickey.

"For most lenders the mortgage portfolio is the largest engine in their business and creates the most enduring customer relationship for the bank."

Mr Hickey added that a growing number of Aussies are choosing to deleverage their debt.

So, as interest rates have fallen, people have decided to shorten the term of their mortgage rather than take on additional credit.

Rates are obviously extremely important in the mortgage field and the nation's major banks have been criticised for their reluctance to pass on the Reserve Bank of Australia's (RBA's) cuts to customers.

Take October for example. The RBA sanctioned a 25-point reduction in the national cash rate, but none of the "big four" - Westpac, National Australia Bank, ANZ and Commonwealth Bank – reduced their mortgage rates by the same amount.

Bosses blamed this on high borrowing costs, but their decision has opened the door for other banks, mutuals and building societies to boost their market share in the home loan market.

Some economists still think the RBA will make further interest rate readjustments in December and it will be intriguing to see how the country's lenders react to this.

Have a question about home loans? Ask the money gurus at Mozo Answers.ADNFCR-1761-ID-801495711-ADNFCR

Mortgage competition 'will remain tight'

Find great home loan deals

Which type of home loan would you like to compare?

Back to top