More home loan borrowers are flocking to smaller banks and stealing market share from the major banks according to new research from RateCity.
In the 12 months to May 2014, the big four banks – ANZ, Commonwealth Bank, NAB and Westpac – collectively lost 0.37 percent market share to the smaller players.
The finding comes at a time when three of Australia’s major banks launched an aggressive rate cutting campaign.
Late last week CBA, NAB and Westpac announced cuts to some fixed rates, including slashing 5 year fixed rates to 4.99 percent.
Alex Parsons, CEO of Ratecity, said the banks are now competing aggressively to win back share of home loan dollars.
“The latest salvo in the competition war, this is the first time we’ve seen the big banks move rates under the 5 percent mark for five-year fixed term home loans,” he said.
“While there has been plenty of action as low as 3.99 percent on one- and two-year terms, the five year category has not historically seen this level of competition.”
Parsons said the major banks still hold the lion’s share of the Australian home loans market, at 84.6 percent.
However, that is starting to shift as Australians gain confidence with smaller providers and become less brand loyal.
“With the scare of the GFC behind us, people are feeling more confident shopping around outside of the big 4. People are getting smarter with their money and, as cost of living pressures bite, realising that paying a higher rate is a waste of money.
This latest round of rate cutting is evidence that the majors are starting to feel the pinch of the shift in the market and are having to meet the market.
The real winners from this competition will be consumers who will be able to materially reduce their costs of borrowing if they understand and compare the different offerings in the market.”
What could this mean to you?
RateCity calculations show that moving from the average variable rate to a 5 year fixed rate at 4.99 percent could save borrowers $51 per month on a $300,000, or $3060 over the course of five years, excluding fees and charges.