Amongst the reams of data, analysis and information released by three of the nation's biggest banks in the past fortnight, there was a surprising consistency in the underlying tale of where they've come from and where each are headed.
Around 75 per cent of new home loans now are negotiated through mortgage brokers. It's a development that has broken the traditional link between client and institution, that has helped put borrowers into the power seat. Banks can no longer rely on a captured clientele and have been forced to battle, not just against each other, but a range of upstart, online operators and aggregators that publish the competing rates from all lenders on your phone screen.Home loans have always been the bread and butter of our big banks. But two big events helped turbocharge their involvement in real estate.
As interest rates fell from the late 1990s on, rising real estate values fuelled a bank earnings bonanza that has continued until now.Aussie Home Loans is under the spotlight on day four of the banking royal commission, over the way it responded to the fraudulent conduct of one of its former brokers.The more they lent, the more prices rose. The more prices rose, the more they lent.
A key recommendation was that banks should sever the relationship with brokers and that commissions should be banned. He argued customers should be paying brokers to get them the best deal instead of payments from the suppliers. The brokers helped unleash a wave of competition that has smashed bank earnings from their biggest business line. Westpac's retail bank earnings dropped 32 per cent in the first half of this financial year. ANZ's division was down 25 per cent and NAB felt the pain as well.Mim felt ignored and "cut loose" from her bank when she asked for financial hardship help. She's not alone, with complaints about banks and lenders on the rise.