Aus­tralia’s non-bank len­ders warn of higher in­ter­est rates

The Pak Banker - - Front Page -

SYD­NEY: Aus­tralia's non­bank len­ders have in­ten­si­fied their at­tack on Trea­surer Wayne Swan's plan to boost mort­gage mar­ket com­pe­ti­tion, ar­gu­ing it will lead to higher in­ter­est rates.

The fed­eral govern­ment wants to ban exit fees on new stan­dard vari­able home loans from July 2011. The Mort­gage and Fi­nance As­so­ci­a­tion of Aus­tralia, the peak body for non-bank len­ders and home loan bro­kers, says this will hurt smaller play­ers, who com­prise just three per cent of the mar­ket.

"They would have to put up their in­ter­est rates," the as­so­ci­a­tion's chief ex­ec­u­tive, Phil Naylor, told a Se­nate hear­ing in Syd­ney on Tues­day.

"But if they put up their in­ter­est rates, they're no dif­fer­ent to the rest of the len­ders in the mar­ket." Non­bank len­ders charge some of the low­est in­ter­est rates in the mort­gage mar­ket but also levy some hefty exit fees. One Vic­to­rian lender charges $7,300 if a bor­rower wants to leave an av­er­age $300,000 mort­gage within the first three years. The Com­mon­wealth Bank charges $700, while West­pac de­mands $900.

ANZ and Na­tional Aus­tralia Bank have abol­ished exit fees. Still, Mr Swan has at­tacked shadow trea­surer Joe Hockey for de­clin­ing to say whether the coali­tion will back La­bor's plan to scrap exit fees. "You've got Mr Hockey sup­port­ing un­fair mort­gage exit fees as high as $7,000," he told re­porters in Perth.

Mr Naylor hit back at Mr Swan's sug­ges­tion smaller len­ders rely on exit fees as part of their busi­ness model.

"They don't build their model on the fact that ev­ery­one's go­ing to leave in the first three years and there­fore they're go­ing to get $7,000 per cus­tomer. That would be dumb," he said. Aussie Home Loans founder John Sy­mond crit­i­cised the govern­ment for fail­ing to ap­pre­ci­ate how non-bank len­ders had driven com­pe­ti­tion. He took ex­cep­tion to the govern­ment's plan to cre­ate a fifth pil­lar in bank­ing by pro­mot­ing credit unions and build­ing so­ci­eties. "It wasn't the bank­ing sec­tor that brought com­pe­ti­tion, it wasn't the mu­tu­als ... but to sug­gest the mu­tu­als can be­come the fifth force in bank­ing, quite frankly, is a joke," Mr Sy­mond, who founded the mort­gage orig­i­na­tor in 1992, told the Se­nate in­quiry. "If the govern­ment wants to make a dif­fer­ence, and pro­mote com­pe­ti­tion, they would have to in­vest some­thing like at least $30 bil­lion a year, $40 bil­lion a year," he said. Sen­a­tor Hurley re­sponded by re­mind­ing Mr Sy­mond about the Com­mon­wealth Bank's one-third share in Aussie Home Loans. "That's a lot of money to pay for com­pe­ti­tion so that you can get 30 per cent off CBA and pocket it," she said.

Aus­tralian Bankers' As­so­ci­a­tion chief ex­ec­u­tive Steven Munchen­berg told the in­quiry non­bank len­ders were un­likely to make a come­back as global credit costs re­mained high. -PB News

LA­HORE: For­mer Prime Min­is­ter and PML (N) Quaid Mian Muham­mad Nawaz Sharif holds a meet­ing with In­dian High Com­mis­sioner to Pak­istan Sharat Sab­har­wal on Tues­day. -On­line

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