Most banks have now gotten rid of cashbacks and other incentives and stopped trying to aggressively compete with one another, in order to boost their profitability
Mortgage holders are facing a lack of strong competition from the country’s major lenders, creating a shortage of good deals, while at the same time higher interest rates and high living costs push more households behind on repayments.
Westpac revealed in its half-year results on Monday that mortgage competition had tempered in a trend that is good for bank profitability but bad for customers looking for new loans or refinancing old ones.
The Westpac chief executive, Peter King, said pressure on the bank’s profit margins had eased in accordance with a pullback on competition in the mortgage market.
We have seen less impact from mortgage competition in our margin and that let us manage the margin well and hold it flat this half, King said.
Australia’s big banks profited significantly from the quick-fire series of rate hikes that eventually pushed the official cash rate to 4.35%, although that also ushered in a period of heightened competition as lenders sought to grow their customer base.
Most banks have now gotten rid of cashbacks and other incentives and stopped trying to aggressively compete with one another, in order to boost their profitability.
Angus Gilfillan, the chief executive at broking group Finspo, said competition between lenders was muted.
They have collectively retreated and they are allocating capital to other business lines where they believe there are better returns, Gilfillan said.
We are seeing that behaviour come through in terms of how hard they are willing to price for customers, Gilfillan said.
It means customers need to shop around more because there are still competitive offers in the market, but they are harder to find, Gilfillan added.
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