Government reforms leave big lenders unchallenged

03/01/2012

Small lenders are failing to erode the dominance of Australia's major banks, despite a year-long push by the Federal Government to bolster competition in the mortgage market. A political firestorm erupted after Melbourne Cup Day in 2010 when the major banks all lifted home loan rates beyond the Reserve Bank's increase in the official cash rate.

The Government soon announced reforms - among them, banning exit fees on home loans and allowing credit unions to market themselves as "mutual banks" as part of a push to create a "fifth pillar".

At the time, Mr Swan said: "I don't mind if people want to stay with the big banks providing it's an active choice, not an act of coercion."

"We're introducing three broad streams of reform to empower consumers to get a better deal, to help smaller lenders put more competitive pressure on the big banks and to secure our financial system so it can continue to provide a sustainable flow of credit to households and businesses."

Now the major lenders account for 86.7 per cent of the home loan market, compared with 87.3 per cent a year ago.

Source: Herald Sun