Newspaper article Daily Examiner (Grafton, Australia)

Buyers Play the Field Online

Newspaper article Daily Examiner (Grafton, Australia)

Buyers Play the Field Online

Article excerpt

FIRST the retailers, now the banks?

The internet's blowtorch that's been searing retailers from book stores to electronics outlets is now turning the competitive heat up on the country's biggest banks.

While customers have long had options to park their savings in online accounts a including those operated by the big four local banks a the offerings are now extending to mortgages, potentially cutting into some of the banks' most lucrative profit streams.

Small online outfits like,, and are among those offering standard variable interest rates a full percentage point below those offered by so-called bricks-and-mortar bank rates.

The average of those mortgage loans offered by the big four banks on August 24 was 7.78%, while an average of the four online-only lenders a unaffiliated with the established banks a was 6.77%, 101 basis points less.

The upstarts remain market minnows compared with the banking behemoths, whose collective profit takings exceeded $22 billion over the past year.

Even so, the banks are likely to keep a wary eye on the fast-growing competition in one of their most profitable sectors.

aWe're really surprised by how much the Australian consumers are willing to purchase a home loan online,a said's managing director Marie Mortimer.

aWe started with five staff three months ago, we're up to 50 now. We've taken over a whole floor of office space.''

The Australian Bankers' Association said although it doesn't represent the online-online lenders, it welcomes the competition.

a[approximately]a[approximately]The housing finance market continues to be a very competitive sector and banks welcome competition from all players in that market a banks, building societies, credit unions and other lenders,'' said ABA chief executive Steven MA1/4nchenberg.

Cost gap

The online pricing advantage for lenders has been evident for years in retailing: potentially much lower costs of distribution, marketing and sales.

Customers also have the ability to make snap comparisons of prices.'s Ms Mortimer said the company charges about six basis points on top of the credit cost to cover its expenses, which includes the lower expenses for staff, office space, and websites.

By comparison, Ms Mortimer estimates traditional banks and networks of mortgage brokers face staffing, shopfront and other costs totalling 45 basis points.

Online lender State Custodians' managing director David Westerman said his company counted among its customers managers from ANZ Bank and Commonwealth Bank.

aWe can offer one of the cheapest rates and make money and that's all off the back of not having to pay a broker,a he said. State Custodians has seen a[approximately]big spikes' in activity on the site recently, Mr Westerman said, without elaborating. …

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