Big Four banks profit from sub-prime crisis

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The Big Four banks regained market shares for the fifth month in a row to achieve a record number of loans, according to the December 2007 Smartline Quarter Trends Report.

The Big Four made up 68% of the 2,400 loans written by Smartline in the last quarter of 2007, the highest share since June 2004.

The Commonwealth Bank of Australia (CBA) experienced the greatest increase in market share with 25% of loans, while Westpac was the only Big Four bank to record a decline in market share, down from 18% the quarter before to a 12% share of the loans in December 2007.

Chris Acret, managing director, Smartline, said the credit crisis in the US “continues to have a direct impact on the Australian housing market”, and has hit consumer confidence in non-bank lenders. 

“While many non-bank lenders continue to offer strong products, more clients are seeking the perceived security of a loan with a Big Four bank,” Acret said.

Commenting on the Big Four banks recently raising variable interest rates, Acret said: “It will be interesting to see if clients react to this by moving back to the non-bank lenders or whether they will continue to seek the safety of the Big Four despite the interest rate increases.”

Fixed rate mortgages are becoming more popular as borrowers try to avoid future interest rate rises, increasing from 10% of the market share to 29% in the last quarter.

Also on the rise is packaged-based lending, most of which have been fixed rate loans. “While typically three out of every four variable loans are written in packages, for the first time ever over half of all fixed rate loans were also written under a discounted package,” Acret said.

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