Home Loans Market Set To Become Competitive Again
A lack of liquidity in global money markets (which has driven up the cost of wholesale funding) combined with the more favourable terms offered to the major banks in relation to the Federal Government’s guarantee for their global borrowings have made it nearly impossible for the non-bank sector to compete in the home loans market for the past 12 to 18 months. At that time the major banks also enjoyed almost 100% of the home loans market because there was little competition from other lending sources. This changed when the non-bank sector entered the market aggressively with bank-like product being long term 25 year principal and interest loans and most importantly priced below the major banks.
Once the guarantee is removed all lenders will be in the same boat and competing on a level playing field for funds. Borrowers can only benefit from this scenario as home loans become more competitive again. Regrettably those borrowers who chose to refinance to a lower interest rate over the past 12 months (and pay the costs of doing so – valuation, legal and establishment fees not to mention exit costs where they applied a) may soon find themselves no better off as the disparity in interest rates disappears among home loan lenders.
Tags: global money markets, home loan lenders, home loans market