The Great Rate Race
Nothing focuses a bank’s mind quite like losing customers. While waiting for the Reserve Bank to make its next move (or despite it), lenders have already started trimming home loan rates in an increasingly frantic battle for borrowers. NAB cut fixed rates by up to 0.20 percentage points this week, joining more than 20 other lenders which have lowered fixed rates since June. Some are even shaving variable rates as competition intensifies.
It’s a reminder that the market is not driven solely by the central bank. Sometimes, the participants simply look around the room, realise business has gone quiet and decide to have a sale.
Finding Its Teeth
Regulators are often accused of arriving after the horse has bolted, filled out three forms and headed for the beach. This week, ASIC proved otherwise. It produced a report card demonstrating it has been diligent and productive, securing a record $830 million in civil penalties and helping return $644 million to Australians through refunds, compensation and remediation programs. It also launched more than 250 investigations and recorded 25 criminal convictions during the financial year.
If companies are paying attention, perhaps next year’s penalties won’t have quite so many zeros.
Building Roadblocks
Housing policy reminds me of something that became embarrassingly apparent when I was learning to drive. You’ll get nowhere if you accelerate with one foot and brake with the other. My point is that just as the government pursues ambitious housing targets, the Housing Industry Association says new restrictions on SMSF borrowing could place more than 2,400 signed home building contracts at risk and reduce housing starts. At the same time, property analysts warn fewer property investors may further tighten Australia’s already stretched rental market.
Everyone agrees Australia needs more homes. Agreeing on how to build them appears to be the difficult bit.
Common Sense Wins
ING has become the first major lender to waive clawbacks where a property is sold between 12 and 18 months after settlement because of circumstances such as death, divorce, redundancy or relocation. It’s about time a bank reconsidered clawback penalty/punishment for decisions which are made beyond a broker’s control and which are often made because the bank itself has stuffed up. ING has also simplified its commission model and lifted the size of the maximum loan which is eligible for upfront commission.
Sometimes reform doesn’t require a Royal Commission just someone willing to admit the old rule never made much sense in the first place. We can only hope other lenders will see the sense as well, or at least are driven to make changes as competition for borrowers increases.
Quite The Nest Egg
There are retirement plans… and then there are retirement plans. Macquarie chief executive Shemara Wikramanayake will leave the bank in November after almost 40 years with direct shareholdings worth more than $375 million, in addition to restricted and performance share units worth many millions more. Her departure was announced just before a lively AGM where executive remuneration again came under shareholder scrutiny.
Most retirement gifts involve a framed photograph and a speech from the boss. Macquarie appears to have taken a slightly different approach.
Another Player
Competition is wonderful for consumers, particularly when someone new arrives with fresh ideas and a banking licence. Fintech challenger Revolut has officially become an authorised deposit-taking institution after receiving APRA approval, allowing it to operate as a fully licensed Australian bank. Deposits will now be protected under the Government’s Financial Claims Scheme as the company expands beyond one million Australian customers.
The established banks may not lose much sleep just yet. But they’ll probably keep one eye open.
In Case You Missed It……..
Wise Heads — CommBank research suggests Australians over 65 are actually better at spotting scams than younger people. The trick, apparently, is remembering to ask someone else before sending the money.
Points Pinched — ANZ has followed NAB in trimming credit card rewards ahead of the surcharge ban. Banks have an extraordinary talent for finding gravity whenever revenue starts floating away.
The Best Of The Best — The MFAA celebrated the industry’s top brokers, lenders and service providers, proving that while finance can be fiercely competitive, it still enjoys dressing up for awards night.
A Final Word
This week proved competition is still capitalism’s greatest motivator. It’s funny how quickly people improve their behaviour when someone else is after their customers—or their wallets.
