Foreign banks hungry for Aussie mortgage market

Yellow Brick Road’s Matt Lawler and Loan Market chairman Sam White believe a surge in foreign bank activity is likely, given the increased competition of the Australian lending space and the safety of operating in the country.

When asked by Mortgage Business if Australia will see the level of lenders in the marketplace return to pre-GFC levels, Mr White said, “If we do, it’ll be through foreign banks coming in”.

“The Australian mortgage industry is incredibly competitive and I often hear people talk about it differently but I think it’s an incredibly competitive marketplace,” he added.

“I don't think the industry needs it to be more competitive, I think we already are a really competitive business, but if there were more lenders coming through we'd like to support them.”

Mr Lawler agrees that competition is likely to come from foreign banks, but he expects the barriers to entry will be much higher than they were pre-GFC.

“The rationalisation of the market, which has created more concentrated mortgage competition, was because pre-GFC you had such lucrative margins which allowed very small operators to step into the market and open their doors and start operating, but the barriers to entry were lower then, whereas the barriers to entry are a lot higher today so I think you will still see competition largely come from domestic players,” he said.

“Obviously some of the bigger domestic ‘distribution’ players in the market today have got the size and capability to become a competitor in providing their own mortgages and here I’m talking about the AFGs, the Mortgage Choices, the Aussies, Yellow Brick Road, Connective – groups like that.

“Outside of this, I think the other competitor is likely to be foreign banks,” Mr Lawler said.

“Foreign banks see Australia as a real safe part of the world to start to participate in from a mortgage point of view. However, the key for a foreign bank entering the Australian market is access to customers.”

Both Mr Lawler’s and Mr White’s comments come after south-east Asia’s largest lender, DBS Bank, officially launched operations in Australia in September last year.

Mortgage Business' sister publication, The Adviser, recently reported that global banking group HSBC is researching its mortgage distribution options in the Australian market, including the third-party channel.

[Related: Global brand outlines local mortgage strategy]