Australian Government Plans To Increase Home Loans Finance Competition.

Australian Government Plans To Increase Home Loans  Competition.

Nobody loves a monopoly except the obvious beneficiary and customers never do well by them. For this reason free market economies strive to regulate the market to avoid monopolies that encourage hubris and stagnant economies. This is true for single company monopolies as with issues with Microsoft and Explorer (although I feel this is a bad example of monopoly, I never understood why someone could think that Microsoft was doing anything bad when it did not include a Netscape browser in their operating system) but with group monopolies where a specific type of business or group of business have a hold on the economy.

This is the case of Australia and Bank home lenders. Banks have according to Australian Consulting company Infochoice more than 92 per cent of the mortgage market, a marked increase from 2 years ago when it had only 79 per cent of the market.
For this reason the federal government is considering extra support for other home loan finance providers other than banks.
Smaller (and often more efficient) finance providing companies are still struggling with the current economic crisis. As we have mentioned in other articles, this desire to choose household bank names over other finance providers when looking for a loan is completely irrational. One can understand choosing a well established/known bank to place your savings or investments on the basis that they may be less likely to go bankrupt and lose your money (not a failsafe tactic as some of the latest big business flops has shown) but when talking about loans any provider is as good as the next as long as the interest rate and lending conditions are the same. Non-bank home loan providers are nearly always cheaper, however this does not stop borrowers from going to the big banks.

In order to fight monopoly the Australian government is considering providing support for non bank lenders to widen the options for customers. These plans also present a response to banks threatening to increase interest rates due to high demand of home loans and low saving levels. Banks claim that because people are saving less and buying more homes on credit they are finding it hard to supply the cash that is demanded and that they must curve this demand with higher interest rates.

Providing financing and guarantees to mortgages for non-bank financing companies will help other finance providers to get a slice of the cake while making it better for the rest of the consumers (that is us). This comes at a time that banks profit margins are increasing and the government wants to share the dependence of borrowers to more than the top ten brand banks.