‘Mortgage wars’ set to heat up again, Heritage says
Heritage Bank chief executive Peter Lock says “the mortgage wars are not over” and is bracing for a fresh competitive push from Commonwealth Bank after its market share declined in July and August.
Mr Lock, who runs the nation’s largest customer-owned bank, said a fresh round of competition would be extremely challenging for lenders because they were only just recovering from the last round of low-ball mortgage offers, highlighted by unprofitable cashback deals to lure refinancing borrowers.
The Heritage Bank boss warned the so-called “mortgage cliff” is still coming. Nikki Short
He said stable funding markets had helped buoy Heritage, which closed a $1 billion residential mortgage-backed security offer in September, but more competition would force it into a delicate balancing act between the best interests of borrowers and depositors.
“The mortgage wars are not over,” Mr Lock told The Australian Financial Review. “I think you will see a competitive market heat up again, and then all the bank net interest margins come under pressure.”
Net interest margins are industry shorthand for the difference between the interest that banks pay depositors and receive from borrowers, and is a core measure of profitability. The big four banks have all reported falling NIMs over the first half of the year, despite the Reserve Bank’s increases to official interest rates.
Mr Lock said interest rates had not peaked – many economists believe the RBA will tighten at least once more – and that mortgage stress remains subdued because of low unemployment.
However, he argued the so-called “mortgage cliff” is still coming.
“I don’t think the impact of the rate changes has fully filtered through yet. We still have some time to go and the real
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