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Jessica Darnbrough
Australia’s non-majors will continue to struggle to be a competitive alternative to the big four over the foreseeable future, one chief economist has claimed.
Speaking to Real Estate Business ING Direct’s chief economic adviser Glenn Baker said high funding costs were stopping Australia’s non-banks and second tier lenders from competing on price with the big four.
“While it is now fair to say there has been some improvements in the funding markets, unfortunately, these improvements are slow and we can’t expect them to make any difference to the competitiveness of Australia’s smaller lenders over the short term,” Mr Baker said.
Despite Mr Baker's comments, Australia's smaller players have fought back in recent months with a raft of policy enhancements and interest rate discounts.
Last month, ING Direct cut 35 basis points from its one and two year fxed rates, while Citibank cut 0.85 per cent from its standard variable rate for customers with an LVR of 70 per cent or less.
In addition, Bankwest unveiled a heavily discounted variable loan in February, which boasts an interest rate of just 6.9 per cent.
But despite these aggressive price moves by Australia's second tier lenders, Mr Baker said it will be some time before the non-majors are back running at full capacity.
When that time arises however, Mr Baker said smaller players should start to become very competitive.
“Just don’t expect it tomorrow, that’s my advice,” he said.
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