Powered by MOMENTUM MEDIA
Powered by MOMENTUM MEDIA
subscribe to our newsletter
LMI competition is unreasonable: ANZ

LMI competition is unreasonable: ANZ

ANZ CEO Shayne Elliott has dismissed calls from the Productivity Commission to offer consumers greater choice when taking up lenders mortgage insurance on their home loan.

Mr Elliott told the Productivity Commission (PC) on Tuesday, 6 March, that lenders mortgage insurance (LMI) is part of a broader package offered by lenders, claiming that it would be unreasonable to “slice and dice” a loan in the name of competition.

In draft finding 11.1 of its draft report into competition in the financial services sector, the PC claimed that the LMI market is “highly concentrated”.

Advertisement
Advertisement

Commissioners questioned ANZ over the lack of “competitive tendering” in the LMI space.

Mr Elliott noted that pricing of LMI isn’t “simple”. He drew an analogy between the issuing of LMI as part of a loan product and the purchasing of a car.

“It’s a little bit like buying a car. I don’t go through and say, ‘I’d like to understand who all the possible providers of the air bags are [and] I’d like to know who are the possible providers of the steering wheel, and the seats and all those bits and prices’ — it’s a package,” Mr Elliott said.

“[LMI] is part of [the] package, and if you don’t want the LMI, you can’t have the loan. It goes together.

“The idea that we should slice and dice all the features and functions and compete on them individually - I don't think it’s reasonable for us to provide that.”

Market competitiveness

Meanwhile, ANZ’s CEO also insisted that the “fluid and competitive” market has provided customers with greater access to low interest rates.

“The market is fluid and competitive,” the CEO said.

“In this market, consumers have won with increased discounts delivering lower rates. Consumers are refinancing both within and between banks to capture lower rates driven by competition.”

The major bank chief acknowledged that while there are “some barriers to entry” in the lending space, new players have been deterred from engaging in the competitive market.

“It’s not that difficult to get a license, set up a bank in Australia and compete, but many have chosen not to, not because of the regulatory barriers, but because it’s hard, because it’s competitive, because returns are low, because there are scaling requirements in terms of being an effective competitor in the market,” Mr Elliott said.

“That may change with fintech and open data, but we’ll have to wait and see.”

[Related: Scrapping LMI would lift rates ‘materially higher’]

LMI competition is unreasonable: ANZ
mortgagebusiness

Charbel Kadib

Charbel Kadib is a journalist on the mortgages titles at Momentum Media.

Before joining the team in 2017, Charbel held roles with public relations agency Fifty Acres, and the Department of Communications and the Arts.

Charbel graduated from the University of Notre Dame Australia with a Bachelor of Arts (Politics & Journalism).

You can email Charbel on: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

Latest News

Three more lenders have announced cuts to their interest rate floors for home loan serviceability assessments in response to APRA’s new gu...

Mortgage-holders are wasting approximately $4.2 billion annually in “unnecessary” interest costs, according to new research. ...

Property price declines have wiped approximately $5.5 billion in revenue from state government budgets, according to a new analysis from Moo...

FROM THE WEB
podcast

LATEST PODCAST: New banks and bank CEOs

Do you think the banking royal commission recommendations could negatively impact competition in the mortgage market?

Website Notifications

Get notifications in real-time for staying up to date with content that matters to you.