Mortgage Wars

The mortgage market is in a state of flux as the warring between the Big Four continues to resemble a game of chess, each player carefully considering their next move.

From the CBA’s decision to hike rates above the official cash rate in November to NAB’s Valentine’s Day ‘break up’ campaign, each move the banks make is having a considerable impact on the market, according to CoreData’s latest Australian Mortgage Report.

The report reveals that the CBA’s decision to raise rates an additional 0.20% beyond the official cash rate has contributed to a decline in CBA’s mortgage acquisition to below system for the quarter to March 2011. CBA’s mortgage acquisition was just 0.9%, below system growth of 1.3%.

Interestingly, however, CBA’s subsidiary and Robin Hood brand – BankWest – turned out to be the ace up its sleeve.

While CBA’s book overall grew some $2.6 billion, $1.1 billion of this was driven by BankWest, which did not raise rates above the 0.25% official cash rate.

CBA has pulled off a classic sleight of hand, like a magician drawing attention away from the hand that is making the switch.

Meanwhile NAB’s Valentine’s Day message to its major rivals has brought significant benefits for Australia’s third largest lender.

For the year to March 2011, NAB increased its mortgage book by some 11.8%; well above system (6.8%) and its major rivals CBA (5.5%), Westpac (6.5%) and ANZ (10.9%).

Further, loan book growth for NAB has increased in the short term almost triple that of system (3.1% vs. 1.3%) in the first quarter of 2011. Other major banks report mortgage book growth for the first quarter to be broadly in line with system – ANZ (1.3%), WBC (1.2%) and CBA (0.9%).

So NAB’s campaign that it is ‘breaking up’ with its major rivals has been a success, however not in the way most envisioned.

Instead of poaching market share from its main rivals, NAB’s campaign appears to have resonated mostly with customers of second tier lenders.

It is the second tier lenders who have struggled with loan book growth over the first quarter of 2011 with ING growing just 0.2% in Q1, Suncorp 0.6%, ME Bank 0.3% and Citibank -0.3%.

The CoreData Australian Mortgage Report is a quarterly publication and the second report for 2011 is available now. The report can be purchased as a one off, or as a discounted annual subscription. For more information please contact CoreData on 02 9376 9600.