Refinancing – Japanese banks would you switch or not?

Competition in the market place

The Australian financial sector will face potential competition from new foreign entrants in the coming years.  However, consumers should be aware that there are already many lenders in the market place that offer alternatives.


JAPANESE banks could snatch $100 billion of the Australian home loan market by undercutting local lenders that fail to pass on rate cuts.

At least three big banks, the $62 billion Mitsubishi UFJ Financial Group, $42 billion Sumitomo Mitsui Financial Group and $35 billion Mizuho Financial Group, are said to be considering opening here.

The arrival of those giants would be good for homebuyers, with Australia’s big four banks hinting they will not pass on an expected Reserve Bank 0.25 percentage point rate cut early next month and others likely to follow.

They blame the rising cost of funds in world debt markets spooked by eurozone woes. Finding funding is less of a problem for Japanese lenders as they have mountains of inexpensive deposits at the ready courtesy of their country’s savings culture.

“The Japanese banks could take 5 to 10 per cent market share away from the Australian banks quite quickly,” said Mark Bouris, head of non-bank lender Yellow Brick Road and a member of Treasurer Wayne Swan’s Financial Sector Advisory Council.

“It is what our marketplace needs.”

To get 10 per cent of the local mortgage market, the Japanese would need to write more than $100 billion worth of home loans, as the domestic mortgage sector totals $1.06 trillion, the latest Australian Prudential Regulatory Authority data reveals.

A new report by Deloitte Access Economics, one of the nation’s top teams of economic analysts, nominates the well-resourced Japanese banks as the most significant threat to Australia’s finance giants after Europe’s debt mess.

“With the eurozone crisis also haunting the horizon and rumours of Japanese competition in mortgage markets, 2012 may be a tough year for the finance sector,” its Business Outlook report, published today, warns.

Our mortgage market “ticks all the boxes” for Japanese banks, said Mr Bouris.

With Aussie Home Loan’s John Symond, he spearheaded the last significant challenge to the big banks.

Australia offered stability, growth, diversification and healthy returns, with lending margins of about 2.5 per cent.

“That level of yield is unbelievably good for Japanese banks,” Mr Bouris said. “It’s quite a compelling argument why they would look at the Australian mortgage market.”

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