The mortgage purse strings are loosening as second-tier lenders bring the fight to the big four institutions
APRA is about to make competition between second-tier lenders and the major institutions a little more even, with the removal of the higher risk rating for mortgages issued by smaller banks. This will result in a more competitive environment and better choice for consumers in their search for home lending.
We're already seeing the impact of competition in the form of reduced home lending rates across a range of lenders including NAB, Westpac, Bank of Queensland and ING. Bankwest however, is pulling back from the position it held last week of lowest-rate lender, increasing its three-year fixed rate by 16 basis points.
Speaking of APRA, it'll be worth keeping an eye on forthcoming changes to rules on banker remuneration over the next few weeks - including an overhaul of the role of the achievement of financial targets in determining pay.
The lending environment may be hotting up, but the impact of the downturn isn't going anywhere anytime soon. Construction approvals fell in March by another 4.7 per cent. As one senior property executive said to me earlier this week, "even if the market turned tomorrow, it would still be at least another ten months before construction levels follow suit."
Consumer confidence got another shot in the arm yesterday with the Fair Work Commission's announcement of the fifth consecutive above-inflation minimum wage rise. A 3 per cent rise, equating to an extra $21.60 per week, brings the minimum wage to $740.80 a week. The unions wanted 6 per cent, while the Australian Chamber of Commerce and Industry wanted less; for people on the minimum wage, the sentiment was "it's better than nothing."
Looking forward, next week's going to be a big one for mortgage lenders. The main event will be Tuesday's monthly meeting of the Reserve Bank to make the call on a cut to the already record-low cash rate. Stay tuned.