With the lack of competition in the banking sector making it harder for home buyers and property investors the Real Estate Institute of Australia (REIA) has thrown its weight behind bank reform, calling for credit unions and building societies to be considered the “fifth pillar” in the banking system.
A Senate committee is inquiring into competition in the banking sector, following criticism that the big four banks are strangling competition for home borrowers and businesses.
The Real Estate Institute of Australia (REIA) said in its written submission to the inquiry that the “market concentration trend” is impacting on home buyers and small businesses.“REIA believes that ways of improving competition in the financial sector need to be vigorously assessed including the possibility of a new pillar in the banking system based on the mutual sector – credit unions and building societies,” the submission said.
The peak body said the proportion of weekly family income needed to meet home loan repayments had risen from 25.5 per cent in March 2000 to 34.6 per cent in June 2010, as interest rates rose and housing affordability continued to fall.
“With a direct link between interest rates and housing affordability, it is important that any changes in retail interest rates are justifiable and are kept to a level that can be accounted for by changes in the banks’ borrowing costs,” the REIA said.
Measures were also needed to address small businesses’ access to finance.
Over the past two years, banks had penalised small businesses by denying access to credit, reassessing already agreed loans, imposing unfair risk assessments and making credit cards too costly.
“REIA believes that measures to stop the penalising of small business finance costs need to be put in place,” the submission said.
Of course like most things related to government, this is all going to take time. The inquiry is due to report by March 31. Then we’ll see if anything happens.
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