 Less competition in the mortgage market
Non-bank lenders are being hit hard by the struggling property markets, with the market share held by non-bank lenders falling to a record low of just 7.7% according to the Australian Bureau of Statistics (ABS).
The data from November last year shows that non-bank lenders have lost half their market share in one year, which has led to concern over willingness of the major banks to pass on cuts in official interest rates.
Elissa Freeman is senior policy officer at Choice and is worried that less competition in the market results in less pressure on the banks to keep rates low.
“With the banks having a 90-plus percentage share now in home loan approvals, that’s clearly not enough pressure on them to drive interest rates lower. In past years, pressure came from non-banks and that pressure’s just not there at the moment. With less power as a consumer, you have less power over fees and interest rates.” Miss Freeman said.
The loss of market share is being blamed on the global credit crisis where smaller lenders are less willing to lend to high risk borrowers and cannot always offer competitive lending rates. Consumers may also be approaching the major banks instead of non-banks lenders as they feel safer with a big name.
Government intervention may be needed according to some analysts and the Federal government is already etching out a program to buy up A$ 8 billion in mortgage securities.
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