Finance – are things easing up yet?
This is the most common work question I am getting from friends, families, clients and referrers. As always, with these types of broad questions it is difficult to give a quick easy answer.
INDICATORS THAT FINANCE IS STILL TIGHTENING
· CBA announcing the reduction of loan to value ratios on its investment loans
· WBC announcing earlier in the year that they will reduce the loan to value ratios on all lending to new customers
INDICATORS THAT WE ARE TURNING A CORNER
· A thawing securitisation market and speedy turnaround times are helping non-bank lenders chase the majors for market share. In a recent industry poll, 72.8 per cent of brokers thought that non-banks are becoming more competitive.
· Investors are showing an increasing amount of support for small lenders looking to raise money from the credit markets. Bendigo and Adelaide Bank managed to raise $1.1 billion in a residential mortgage-backed securities issue – $450 million more than it was originally seeking.
· Acknowledgment from senior RBA officials that the major banks market share dominance may have peaked. The recent improvement in the securitisation market could help the pendulum swing back in favour of smaller lenders, the Reserve Bank’s assistant governor Guy Debelle has said.
· A revived securitisation market has helped AMP slash the interest rates on its entry level home loan products. The bank, which in early March joined the big four in raising its standard variable rate by 25 basis points, recently announced it would drop 22 basis points off its basic variable home loan.
· Macquarie Bank has stepped up its presence in the mortgage market, announcing that it will trial a new mortgage product
In short, the majors are still tightening their criteria but I think that they are tightening their criteria at a slower rate than last year. Also, there appears to be pressure on their market share dominance. If this pressure is maintained, then there will be pressure for them to stop tightening and maybe even start easing their criteria.