TEACHERS Credit Union has given its new Perth office plenty of time to prove it's a worthwhile venture.
TEACHERS Credit Union has given its new Perth office plenty of time to prove it's a worthwhile venture.
Part of the generosity appears to be linked to the fact the opening of the East Perth office has coincided with a period of economic uncertainty where non-bank mortgage providers face a huge challenge in attracting members.
Teachers Credit Union chief executive Steve James told WA Business News he was acutely aware that investors sought out big institutions in times of economic crisis.
"In these uncertain times people tend to stick with their instos," Mr James said.
"In the flight to safety people went to the banks, but we want to have some of them."
Mr James said he would give the Perth office five years to prove itself.
Figures released this week show a couple of major institutions are controlling the mortgage market, leaving little room for competitors.
The Commonwealth Bank of Australia and Westpac accounted for 85 per cent of all new mortgages written in the June quarter, according to CoreData.
Westpac's mortgage book increased to $15.2 billion (St George contributed $3.2 billion) and the Commonwealth Bank increased its book to $15.1 billion ($1.3 billion from Bankwest).
Mr James said credit unions had, however, taken ground from mortgage originators hurt in the credit crunch.
Teachers Credit Union, which opened its Perth office late last year, joins groups such as the Police & Nurses Credit Society and United Credit Union in the local market. There hasn't been a local credit union specifically servicing Western Australian teachers since the demise of the Western Australian Teachers' Credit Society more than two decades ago.
Only two years ago, banks and credit unions that solely used deposits to fund lending were criticised, as the likes of Macquarie Group were accessing cheap debt in the capital markets, and offering better rates.
Mortgage originators, such as Aussie Home Loans and RAMS, undercut those reliant on deposits by packaging up loans into mortgage-backed securities, which they sold to institutional investors.
The credit crunch ended the era of cheap debt, and home owners have flocked back to institutions with big deposit books, which are, in general, offering more competitive rates.
Andrew Inwood, the principal of financial services consultancy brandmanagement, said banks with brands offering security now also had good rates. (brandmanagement is a sister company of CoreData.)
"In the past few months, most banks have been rushed with mortgage applications as consumers seek to exploit the first home buyers grant - and with tight credit controls in place it's been Westpac and CBA that have been able to stand and deliver client service at this time - which means they can effectively steal business from those banks that can't commit to service," Mr Inwood said.
Reserve Bank governor Glenn Stevens said last week the time was approaching to wind back the guarantee of wholesale and deposit funds, amid concerns over big bank market dominance.
Mr James said there was no need to start up a "people's bank" to compete against the banks - as some have been calling for - because credit unions already fulfilled that function.
In the rush to the big brands, consumers have side-stepped some good rates on offer from credit unions and building societies, many of which have large deposit bases to draw upon.
Several non-banks, including Heritage Building Society, offer variable home loans at a rate of less than 5 per cent, which can't be found at the banks, according to data compiled by Canstar Cannex.
