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Banks set for home loan battle

Banks and credit unions will do battle to attract potential home loan customers over the next few months.

Author: Sam Gooch
Date: Jun 23, 2011 - 12:03:14 PM

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Banks and credit unions will do battle to attract potential home loan customers over the next few months.

Australia's banks are gearing up to woo potential buyers with cut-price home loans in an effort to breathe new life into the sluggish housing market, despite the prospect of further interest rate increases.

With the government's ban on home loan exit fees due to come into effect from July 1st, competition between lenders is poised to intensify and a number of discount deals have been unleashed as part of their attempt to attract customers.

According to the Savings Blog, credit unions are also getting in on the action, with Credit Union Australia unveiling a three-year fixed rate at 7.14 per cent. Aussie Home Loans, meanwhile, has slashed its variable rates to 6.99 per cent per annum for new clients.

"From a choice point of view, if you look at the choice consumers have, whether they can get a better deal ... there's definitely more choice out there now than there was at least two years ago," InfoChoice spokesman Dirk Hofman told the Australian.

Mr Hofman added that competition is likely to intensify over the next few years as firms do battle to undercut one another and more companies return to the housing market, boosted by the freer availability of financial support.

Nathan McMullen, head of product development at Westpac, predicted that major banks would gradually begin to assert themselves as the big players in the sector and noted that demand for fixed-rate mortgages had declined recently.

He claimed that "between five and seven [per cent]" of Westpac's lending was in the form of fixed-rate arrangements and suggested that lenders looking to make a splash in the market should concentrate on their variable rate offerings.

Last week, the Sydney Morning Herald reported that National Australia Bank's (NAB's) online subsidiary Ubank had revealed plans to provide standard variable rate home loans of more than 0.5 per cent below NAB's own equivalent.

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View all articles by Sam Gooch

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