The big four bank’s mortgage footprint remains firmly on the throats of the remaining Australian lenders - continuing to asphyxiate an industry it already controls.

Don’t get us wrong, residential lending competition isn’t dead in Australia, it’s just mortgage borrowers continue to shun other lenders offering lower rates, and then yell kicking and screaming when one of the big four increases rates outside of the official cash rate cycle.

With a 5.77 per cent average ongoing variable for the big four (including St. George and Bankwest brands), pricing of the majors is far higher than other groups, such as ME Bank with 5.39 per cent or ING Direct with 5.09 per cent.

Yet the post merged big banks increased their combined residential lending portfolios by $9.3 billion in May 2009, over and above the $9.2 billion for all banks offering residential lending in Australia, both Australian-owned and foreign.

Analysis published in the CoreData Australian Mortgage Report shows the combined mortgage portfolios of tier 2 Australian banks actually fell by $284 million for the period to $116 billion.

Macquarie bank with a mortgage book decline of $424 million to $17.7 billion had the biggest impact for the month, but this does not raise a competition concern as the bank ceased residential lending around two years ago.

The competition problem emerges with the stunted growth of AMP Bank gaining just $31 million (total portfolio $8.2 billion), Suncorp $57 million ($28.2 billion), ME Bank $58 million ($16.2 billion) and Bank of Queensland $191 million ($19.7 billion), during a period of very strong residential lending demand due to government stimulus offered through the first home buyer grants.

The Bendigo & Adelaide mortgage portfolio decreased $197 million to $25.7 billion, as the impact from the reducing Adelaide Bank portfolio continues to skew the book.

Foreign banks are also failing to entice mortgage borrowers to any significant level, with the internationals combined increasing a subdued $234 million to $50.4 billion in May.

Growth was predominately driven by ING Direct with a $205 million gain to $34.9 billion, with HSBC Bank increasing $122 million ($4.8 billion), although Citigroup decreased $107 million to $9.6 billion.

Australian mortgage borrowers have sufficient lending alternatives outside of the big four, they just require the improved knowledge of their existence.

Interest rates sourced from www.infochoice.com.au.