“They are limited in terms of competing with majors on a national scale. These are realities which smaller lenders can use to their advantage when tailoring their business models."
Smaller banks and non-banks to offer borrowers better mortgage deals in 2013: Deloitte
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Borrowers are likely to get a better deal through a subsidiary brand of a major bank in 2013 or by going to a mutual bank or non-bank lender, according to the latest Deloitte Australian Mortgage Report.
This finding is based on sentiments of a roundtable discussion made up of senior executives representing banks, non-banks, mutual lenders, mortgage brokers and mortgage insurers.
The report forecasts that banks will still chase market share targets and “aggressively compete for whatever growth exists”, but it is likely that in 2013 the majors will use their subsidiary brands as the “more aggressive price competitor, so protecting their main brand and its margins”.
“To meet borrowers’ demand for lowest price, it is also likely that the majors will use their subsidiary brands at a more aggressive price point and so shift up a competitive gear,” says Deloitte financial services partner James Hickey.
This approach is already in evidence, with Westpac subsidiary St George currently promising to beat any advertised home loan interest rate offered by the four major banks.
The special offer is available until December 21 for new home loan customers, with a $1,000 rebate also available to help new customers cover the cost of purchasing their new home.
To take advantage of this offer, customers need to provide a copy of the relevant bank’s advertisement (print, radio or online) showing the interest rate being offered.
“I encourage people to look around, find the cheapest rate advertised by one of the four major banks then contact us, so we can offer them an even better rate,” says Andy Fell, general manager of St George retail banking.
Unsurprisingly, the offer does not mention that St George is 100% owned by big four bank Westpac.
Westpac has a standard variable rate of 6.71% with St George offering 6.69%.
Other subsidiary brands of major banks offering better deals than their parent banks include NAB’s online offering UBank, consistently offering among the cheapest fixed and variable refinancing offerings.
Bankwest offers an online variable rate loan at 5.58%, compared with parent bank Commonwealth Bank’s best offering (excluding one-year introductory specials) of 5.9%.
According to the Deloitte report, “price, and the level of discounts offered to the standard variable rate (SVR), will be a lever which banks use to tap into market share”.