Japanese Banks Target Australian Home Loan markets

Mega Japanese Banks are preparing to launch a surprise attack on the mortgage profit margins of Australia's big four banks. Why this sneaky raid will succeed

The big four banks, CBA, NAB, Westpac and ANZ are the envy of the banking world. Meanwhile Japanese banks have been in operating successfully in a recession economy for twenty years. In fact the interest rates they operate on are puny compared to Australian Home loan interest rates and bank margins. So its natural that they want a piece of the action.

Some say that Japanese banks could get a $100 billion of the Australian home loan market in double quick time. I agree.
At the coming February RBA board meeting most financial analysts are punting on a further rate cut to the official cash rate. That normally translates to a similar reduction in mortgage interest rates. However some of the big four banks are hinting at not passing on all of the rate difference, citing rising funding costs as the reason.
A cynic might suggest that the real reason is maintaining profit levels in a shrinking home loan & credit card finance by Australians.

Japanese banks are all cashed up with nowhere to lend

Japanese lenders are brimming with low cost cash because of the recession, and the Japanese savings ethic.
Australian banks on the other hand also pay puny interest rates, but lend that money out at fat profit margins.

Australia's trillion dollar mortgage pie. How big a slice can the Japanese hope to get?

Australia's trillion dollar home loan market looks ripe for the picking.
Snaring just a 10% slice of Australia's Mortgage pie would give the Japanese Banks a $100 billion dollar windfall.

A Japanese Bank raid a cakewalk for four good reasons.

1. Australians have no loyalty to their banks. Aussies love to hate banks. But they don't love them that much.
2. Australian home owners and home buyers will change lenders, and they do so often.
3. Money talks. Australian home buyers and homeowners are hurting financially, mainly because they paid too much for property on the basis of low interest rates, high loan to value ratios on loans and other lax lending practices.
4. Ready-made sales channels. Single unit and franchise mortgage brokers have established channels that the Japanese raiders can tap into instantly.
5. Japanese banks could also operate an online Australian mortgage channel, as this is how a lot of Australians looking to refinance do their research these days.

2012 may prove to be a tough year for mortgage lenders in Australia, and that means a better deal for Aussie home loan borrowers.

That has to be good news for the real estate industry and the home building sector, who have both had a rough 2011.

Summary

The impending Japanese Bank home loan invasion may be the tonic Australia needs to reinvigorate real competition in home loans, the mortgage broker sector, the new home building industry and the housing market, and put a creator in Australia's big four profits at the same time. So are Australian home loans turning Japanese? Yes I think so.

Are Mortgage Brokers honest with home buyers and refinancing homeowners?

Mortgage brokers are in the firing line of late, and now Westpac bank and the Commonwealth bank are putting pressure on accredited mortgage brokers, telling them that if they don’t have a certain number of loans settle with them within a 6 month time frame, they will lose their accreditation with the lender.
The mortgage brokers have responded by saying that their “Independence” is in jeopardy, because many brokers will bow to the pressure and set loans for clients for the home buyers or refinancing homeowner with these lenders, rather than the best loan for the customer.
In my prior article I was a little harsh on these brokers, and this brought up the question of honesty of the Mortgage brokers.
So here is my revised take on this important topic.

The Mortgage Brokers Intent indicates his or her honesty.
Honesty should not be taken on a legal or literal definition of the relationship between the mortgage broker and the lender and the home buyer or refinanced homeowner, but on the intent of the mortgage broker when they are helping their customer select the best loan for them.
If the Mortgage Broker has the intention of always selecting the very best mortgage lender and mortgage loan product for their customer, then its obvious that the mortgage broker can be considered an honest mortgage broker.
If the Mortgage broker explains to the client that they are offering a no cost loan service to them, because the lenders are paying them a commission for introducing the loan to the lender, they are being honest with the customer in my view.
If on the other-hand the mortgage is selected favours the mortgage broker and his or her own personal interest, then the mortgage broker would have to be considered dishonest in my view.
Banks and other mortgage lenders that offer lenders inducements to put loans through them, compromise the brokers’ impartiality.
So do lenders that force lenders to have sales targets. Doing so in my view makes mortgage brokers appear commission representatives of the lender.
That has to be a bad thing for the mortgage broker industry and the customer than place their trust in a Mortgage Broker to do the right thing by them according to Mr Mortgage.

Westpac bank passes on rate reduction to thier credit card customers

Australia's first bank was the first bank to pass on the Reserve Bank's 100 basis point interest rate cut to its mortgage customers.
But the real suprise was that Westpac wrer also the first bank to reduce the credit card interest by the full one per cent interest rate also when it announced it will also reduce its 55-day credit card rate by 100 basis points.
The nation's other big banks are yet to announce reductions in either home loan rates or credit card rates, or loans rates to small business, after the Reserve Bank's announcement at 2.30pm (AEDT).

Are property prices, demand and mortgages to be driven by DIY superannuation?

Far from depressing the property market, the changes to super might just spur it along.
Already real estate is picking up in Brisbane, Melbourne and even in the inner city and top end parts of Sydney, a victim of past excesses, and also a growth in mortgage loans.
As far as I can gather, DIY super funds were being topped up as much by flicking share portfolios as flogging investment properties. In any case, if the super changes really were a problem for property, they won't be after Saturday.
The question is no longer when property prices will recover but how high they'll go. That alos applies for mortgages.
Is this the start of a new boom? Not if you believe economists. But I'm not so sure. Perhaps they need to look at the recent speech by the governor of the Reserve Bank, Glenn Stevens. You would have heard all about his hint of an interest rate rise in a few months, but it was his comment about the property market that was the real eye-opener.
He said: "The number of dwellings being built looks to be below what is normally thought to be underlying demand arising from population growth and household formation."
In Reservespeak, they're fighting words. He's saying there's a shortage of housing and developers should get on with it.
Demand is outstripping supply because of soaring wages, job growth and a pick-up in immigration.
Stevens went on to explain how difficult this shortage of housing will be to fix because the economy is running at full capacity: labour and materials to build houses will have to come from mining or infrastructure.
The point is for that to happen, construction costs would soar, which can only boost the value of existing properties.
Meanwhile, rents are rising because vacancy rates are the lowest in a lifetime, and the sharemarket is distinctly pricey, so all those cashed-up DIY super funds would have to be running the ruler over real estate.
Source: Sydney Morning Herald