Mortgage war looms as smaller banks show they are more than willing home loan providers: APRA figures

A mortgage war between the four major banks and the smaller banks is looming as APRA figures show regional banks Bendigo & Adelaide Bank and Suncorp along with investment bank Macquarie Bank and mutual bank Members Equity Bank competed strongly for new mortgage customers in 2012.

This week Westpac signalled its intentions by becoming the first major bank to currently offer a fixed-rate home loan below 5%, while its subsidiary brands RAMS and St George have also cut their fixed-rate offerings.

Fairfax economic commentator Michael Pascoe told David Koch on Sunrise this morning that all a customer had to do was walk into his or her bank, show a loan approval from a lender like ME Bank offering a lower variable rate, and the bank would match it or beat it – echoing similar sentiments made by Business Spectator’s Robert Gottliebsen.

Pascoe says variable mortgage holders should not be paying an annual interest rate of more than 5.5%.

Tim Brown, CEO of mortgage aggregator VOW Financial, which has 600 mortgage broker members, told Property Observer recently that he expected banks to launch their discounted mortgage offerings over the next two months as they looked to improve their mortgage settlement numbers ahead of reporting season.

But he says it is possible to get a discount of up 100 basis points just by shopping around.

“Some of these discounts are advertised, but the bigger ones are a negotiation dependent on the standing of the borrower,” he says.

Property Observer's analysis of APRA banking figures for the 2012 calendar year reveals that Bendigo & Adelaide Bank and Suncorp increased their owner-occupier home loans books by more than $2.5 billion each, achieving annual growth rates of 19.4% and 12% respectively.

This compares with average industry mortgage growth for owner-occupier lending over 2012 of just 4.1%, according to RBA figures.

Click to enlarge

Source: APRA

* Commonwealth Bank and Bankwest figures combined from November 2012, Bankwest mortgage book around $38 billion.

The January 2013 competition index compiled by mortgage broker AFG reveal that Suncorp, in addition to performing well in its home state with 8.2% of the Queensland market and ranking as the fifth biggest lender, also performed strongly in NSW (sixth biggest lender with 9% of the market) and with some success in WA (eight biggest with 3.1% of the market) and Victoria (seventh biggest, with 2.8% of the market).

The APRA figures also show that Macquarie Bank was another stand-out home loan provider over 2012, with the fastest-growing home loan book of all bank lenders.

Over 2012, Macquarie doubled its owner occupier mortgage lending book from $1.55 billion to $3.17 billion as it returned  strongly to mortgage lending following its post-GFC exit.

Macquarie also teamed up with Mark Bouris’s Yellow Brick Road franchise venture in November to provide wholesale funding for its mortgage lending.

Another strong performer was mutual bank Members Equity (ME) Bank, which provides discounted home loans to eligible super fund and union members.

ME Bank currently offers a standard home loan rate to members of 5.88% compared with an average standard variable home loan rate of 6.42% offered by the major banks and is one of a number of lenders offering a one-year fixed rate at 4.99%.

Among the major banks, NAB was a strong performer, growing its home loan book by nearly 10% - more than double the average industry growth rate.

NAB offers the lowest standard variable rate of the major banks at 6.38% and has maintained this ranking for the past 43 months as part of a pledge to customers.

ANZ managed to growt its mortgage book by 6%, but both the Commonwealth Bank and Westpac – the two biggest home loan providers in Australia – grew at well below the industry average.