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Why won't the banks ever learn?
There's little doubt the biggest winners from the GFC have been the major banks. While the bank's have continued to cry poor about their margins and cost pressures their profits have remained largely unaffected. And they have been on one of the biggest spending sprees in the last decade, gobbling up smaller players including:
As borrowers got nervous about the end of the world the banks also picked up the lions share of loans written nationally. But of course rather than being appreciative of the support from customers they are now taking the opportunity to tighten their lending criteria, increase their rates above the RBA and start increasing fees. It seems one thing we can always rely on the banks for is short term thinking when it comes to their customers.
But this negative is actually a positive for you because it opens the door for competition. There are a number of high quality non-bank lenders who have ridden out the storm and now providing the market with competitive pricing, innovative products, fast turn around and personalized service.
This is evidenced from the date in Australian Financial Groups Mortgage Index for February which showed 17% of all loans written were by non-bank lenders. For investors focused on building their portfolio we believe the non-bank area should be an essential part of an investors funding mix. Just as it is important to have balance in a portfolio the same applies to the lending.
And having all your eggs in one basket can restrict flexibility.
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