 Less competition in the mortgage market
Industry voices are backing the general public's concern over the Big Four having such a large competitive advantage in the home loan market. Last week, even the Reserve Bank of Australia expressed concerns over the dominance of the larger banks.
With smaller banks and credit unions being pushed out of the market, competition is dwindling The Big Four banks, comprised of Westpac,
Commonwealth Bank, National Australia Bank and ANZ are ruling the mortgage market. Following the financial mess seen in other banking systems such as the US and UK British, our banks are ranked among the top 20 banks worldwide.
Australian banks do sit on a total $14 billion of bad debt, however they can counteract this with larger interest margins and an increasing share of the mortgage markets, deposits and credit cards.
Former consumer champion Allan Fels does not pull any punches. He believes "we have a disaster on our hands".
"Fees and margins can only go up," says the former Australian
Competition & Consumer Commission chairman. "Even if banks are
feeling short-term pressures, the long-term benefits of the
disappearance of competitors will be long and enduring."
Rob Hunt from the Bendigo and Adelaide Bank thinks the big banks have the advantage of lower funding costs. The chief executive says this is one cause of the falling competition.
As the Big Four get more powerful, there is less competition. Last week Kevin Rudd accused
CBA of "profit gouging" after it raised variable mortgage rates. This is just one example of what can happen when there is less competition.
Brandmanagement have figures showing
that the take over over smaller banks like St George (now part of Westpac) and
BankWest (CBA) have increased the share that the big four hold in the mortgage market during the economic crisis from 57 per
cent to 72 per cent.
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