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Determined to improve competition within the home lending market, the federal government is gearing up to launch a fifth pillar of banking.
The new pillar would use the resources and muscle of the $73 billion credit union and building society industry to steal market share away from the major banks.
Treasurer Wayne Swan said in order to create the fifth pillar, several controversial measures needed to be implemented, including injecting money into the securitisation market to allow non-bank lenders to raise funds at a similar cost to large banks.
The rest of the measures are currently being kept a secret, but industry whispers suggest all will be revealed before the Senate inquiry into banking competition resumes on December 13.
Abacus, the industry body for credit unions and building societies, welcomed the debate about banking competition and the focus of the government on possible reforms.
"The government has made it clear that it will take action to promote competition and we appreciate the recognition our model is getting as part of this debate,” Abacus head of public affairs Mark Degotardi said.
"Credit unions and building societies support competition. We're hopeful the competition reform package, once announced, will target barriers to choice and look at ways to improve funding for competitors to the big four banks.”