Banks battle to woo clients
BANKS and lenders are battling for mortgage customers on two fronts – by wooing new customers and looking to pick up some of the anticipated $500bn in refinancing activity as rate hikes continue.
Economists are expecting the Reserve Bank to jack up interest rates by as much as 50 basis points (bp) again this week, reflecting the sixth rapid increase since May. Another 50bp hike to tame inflation would take the cash rate to 2.85 per cent – the highest since April 2013.
The rising interest rate environment caused a sharp 11 per cent drop in the value of new home loan commitments in July, compared with a year earlier, and house prices are falling as demand wanes.
Banks are having to fight harder to lure new customers and those seeking to refinance, or even retain existing customers that may be shopping around due to rising rates.
“Lenders are actually aggressively pricing for refinance as well as new business,” MA Financial’s managing director of strategy and growth John Kolenda said.
MA – formerly Moelis Australia – acquired mortgage broking group Finsure Finance in a deal that completed early this year, giving the company strong insights into the home loan market.
Mr Kolenda – who cofounded Finsure – said banks were competing hard to win mortgage customers, while refinancing was accounting for a bumper 55 per cent of volumes.
“Traditionally, if the purchase market is really strong then they’re out there for new borrowers and they ignore the refinance market, and when the market tightens they go for the refinance market,” Mr Kolenda said.
RateCity data shows the biggest cashback offers in the market come from Reduce Home Loans, AMP and Citibank, whose local retail operations are now owned by National Australia Bank.
Reduce provides $5000 cash back for home loans of $750,000 to $2m, Citi offers $5000 for mortgages of more than $850,000 while AMP provides $5000 for loans of more than $1m.
Tic:Toc chief Anthony Baum said the digital lender and fintech platform was seeing heightened mortgage competition, and was positioning for a wave of refinancing activity as more borrowers neared the end of their terms on cheaper fixedrate mortgages.
Within the competitive dynamics, Commonwealth Bank and ANZ on Friday announced revisions to fixed-rate home loans.
ANZ increased its one-year fixed rate for owner-occupiers and investors by 50bp
CBA hiked its one and fouryear fixed rates by 40bp and 50bp, respectively.