Last week I got a letter from my lender, instead of the expected notice about an interest rate increase, the message was rather more disturbing: my lender is withdrawing from the market. While they will continue to service me and their other customers they won’t provide any new loans.
In late 2006 I wrote a news story for CHOICE about three new online home loans offering great rates – one of them was my lender, One Direct, a subsidiary of ANZ. It’s a reflection on the decrease in competition in the mortgage sector that all three have now stopped providing new loans:
- Virgin Money stopped providing new loans in September 2008 as their partner Macquarie Bank closed down their retail home loans facility as a result of the credit crunch.
- Homepath, owned by CBA, stopped providing new loans just one month later.
- Now ANZ is effectively closing down their subsidiary One Direct.
We asked both banks for their reasons: CBA mentioned increased funding costs and ANZ said they recognized they would need a large investment to get One Direct from a niche brand to a large business, both told us they had decided to concentrate on their core brand.
Our home loan shadow shop last year identified the One Direct loan as one of the cheapest standard variable home loans, today it still offers a very competitive 5.29% standard variable loan rate.
But what about tomorrow? Will they still stay competitive now that they no longer compete for new customers? While personally I feel a bit uneasy about these developments there is not much I can do about it. I’m still locked into my loan with One Direct because an early repayment fee of $1000 applies to me, not just once but four times since I have split my loan into four different loan accounts, two of them fixed. This means I could be stuck with an uncompetitive lender for another two years if One Direct decided to raise rates now that they’re no longer competing for new business.
Have you been affected by the decreased competition in the home loan market or by early repayment fees? Has your lender done something you find disturbing?