NAB says mortgage wars a boon to business

NAB says mortgage wars a boon to business
NAB says mortgage wars a boon to business

NAB’s cut-throat mortgage discount battle with its major bank competitors, which began with its “Break up” campaign on February 15, is helping its overall business, according to its head of business banking.

Rather than hurt its overall business profitability as some claim, Joseph Healy says it is having quite the opposite effect. He claims the mortgage wars have had a “halo effect”.

Healey tells the Australian Financial Review the bank’s business customers are impressed by its “bold” personal banking strategy.

“It has been a marvellous help to differentiate NAB in the marketplace.”

Earlier this month, JP Morgan banking analyst Scott Manning said bank mortgage discounts were about as competitive as they could get “prior to diluting group returns”. 

Manning says banks are currently offering average discounts of 90 basis points off standard variable rate products and anecdotally 1.15% on larger loans. 

“We would consider discounts in excess of 120 basis points off a standard variable product originated via the branch network as uneconomic, or discounts in excess of 90 basis points via [mortgage] brokers [as uneconomic],” Manning says. 

The major banks have been seeking to steal mortgage market share from each other during a period of weak overall credit growth. 

Despite NAB’s “break up” campaign, its share of the mortgage market remains well below that of the CBA and Westpac. 

Estimates by the Royal Bank of Scotland put NAB’s market share of outstanding home loans at 15% compared with Commonwealth Bank’s 27% and Westpac’s 25%. ANZ has the smallest market share of the Big Four at 14%. 

According to August figures put out by the RBA last week, housing credit increased by 0.4% over August, the weakest pace since July 2009 and following an increase of only 0.5% over July 2011. 

Over the year to August, housing credit is up just 5.8%.

Larry Schlesinger

Larry Schlesinger

Larry Schlesinger was a property writer at Property Observer

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