Superannuation funds pose indirect threat to banks

Banks would easily repulse a head-on mortgage assault by superannuation funds – but they could be vulnerable to a flank attack.

According to Genworth’s annual mortgage survey, 17 per cent of lenders believe superannuation funds are the most likely new entrant to impact the mortgage market.

The research also found that 22 per cent of brokers identified super funds as the new entrant that would have the biggest impact on the mortgage market.

Pauline Vamos, chief executive of the Association of Superannuation Funds of Australia, said super funds would struggle to compete with banks if the regulators allowed them to sell mortgages.

“Whenever you’re going into an asset class, you must understand the risks, you must understand the returns and you must understand the asset class,” she told Mortgage Business.

“Banks have deeply developed skills in terms of assessing credit. Those skills are not within funds at this time.”

Ms Vamos also said it would be difficult to succeed in the mortgage market without scale. “Starting from scratch in a business that isn’t a core business is very difficult,” she said.

Super funds currently have about $170 billion tied up in banks, according to Ms Vamos, and might look to diversify their portfolios by backing other mortgage distributors.

Ms Vamos told Mortgage Business that the banks were likely to be worried about the ability of super funds to provide finance for potential competitors.

“They know that home mortgages are a good asset class, but the only way to get access to that asset class at the moment is by being a significant shareholder of a bank,” Ms Vamos said.

“You might have a fund with millions of members. It could go to a product manufacturer that manufactures mortgages and do a deal with them where they would distribute their products.”

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