Serious competition is dead … Aussie Home Loans has agreed to buy the distribution network of Wizard and Commonwealth Bank will purchase Wizard’s $4 billion home loan book, effectively ending serious competition in the mortgage market in Australia.

Aussie itself is partly owned by Commonwealth Bank, whilst Rams is now fully owned by Westpac. Aussie, Wizard and Rams were the original originators (non-bank lenders). In the mid and late 1990’s they took the banks on, using the burgeoning mortgage securitization market to offer home loans at a discount to what the banks were lending.

It triggered one of the great financial windfalls for home owners of all time. Banks were forced to cut profit margins sharply on home loans to compete, and mortgage rates fell. Most of us have paid much less in home loan repayments over the past decade simply because there was some competition in the marketplace.

But the credit crisis hit and the non-bank lenders couldn’t compete on their own. The banks will have the market to themselves again. After the Wizard deal, there will be no large, independently owned, non-bank lenders in the market.

This also follows consolidation in the banking sector itself, with second tier banks St George being absorbed by Westpac and Bankwest being bought by Commonwealth Bank. Suncorp Metway has so far survived, but the recent reduction of it’s rating from A+ to A will lessen it’s competitiveness.

The major banks will have it their own way again. While some niche operators will continue, the choice for most will come down to the big four banks. This could severely impact investment borrowers, in particular.

Many changes are flowing through. Already, the banks have restricted lending for future investment purposes and are unwilling to refinance some existing mortgages, necessitating the adoption of different lending strategies from those used in the past.

 To see how the changing lending environment will affect your existing and future lending, contact our finance division  for a Financial Health Check. We can evaluate your current facilities (and see if these are still the best options for you), as well as look at how we can help you position yourself to move forward in the future.