Following Xinja's exit, NAB's planned purchase of 86 400, and Volt still not having a publicly live product, requirements for new bank launches have tightened.
In a discussion paper released yesterday, the Australian Prudential Regulation Authority (APRA), announced it would change the framework in how it grants banking licences.
The changing framework includes: "Focusing applicants and new entrants on longer term sustainability rather than the short-term ambition of receiving a licence and becoming an ADI".
An 'Authorised Deposit-taking Institution' (ADI) is a banking licence granted to financial institutions so they can take deposits, as well as lend money.
"Achieving an ADI licence is a milestone, not a destination, given the considerable development that continues in the years following authorisation. While there remain two pathways to authorisation, the desired destination is the same: sustainability," APRA's paper said.
Other stipulations include new entrants having more advanced planning for an exit, increased transparency to stakeholders of capital requirements, and that "entities should launch products before being granted an ADI licence".
"This revised approach effectively targets key risks for new entrants, setting a higher bar for gaining a bank licence, while enhancing competition by making it more likely new entrants can find their feet and gain a firm foothold in the market," APRA's deputy chair John Lonsdale said.
As a result of raising barriers to entry, APRA forecasts that there could be fewer licence applications.
This follows Xinja's exit from banking, and NAB's planned purchase of 86 400 within four years of the bank launching.
Yesterday, Volt announced it has teamed up with finance platform Railsbank to distribute Volt's products, with Volt not having a publicly live product two years after being granted an ADI.
However, it has amassed 8,000 customers and $85 million in deposits with the savings account in 'beta'.
APRA is welcoming submissions to the revised framework until the end of April.
Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.
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| Variable | More details | ||||||||||||
| FEATUREDUNLIMITED REDRAWSSPECIAL OFFER | Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)
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Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)
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| Variable | More details | ||||||||||||
| FEATURED100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES | Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
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Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)
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| Variable | More details | ||||||||||||
| NSW/VIC/SA METRO & INNER REGIONAL AREAS | Variable Home Loan (Principal and Interest)
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Variable Home Loan (Principal and Interest)
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| Variable | More details | ||||||||||||
| REFINANCE ONLY | Variable Rate Home Loan – Refinance Only
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Variable Rate Home Loan – Refinance Only
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| Variable | More details | ||||||||||||
| NO ONGOING FEESFREE REDRAW FACILITY | Live-in Variable Loan (Principal and Interest) (LVR < 90%)
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Live-in Variable Loan (Principal and Interest) (LVR < 90%)
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- Fast turnaround times, can meet 30-day settlement
- For purchase and refinance, min 20% deposit
- No ongoing or monthly fees, add offset for 0.10%
Base criteria of: a $400,000 loan amount, variable, fixed, principal and interest (P&I) home loans with an LVR (loan-to-value) ratio of at least 80%. However, the ‘Compare Home Loans’ table allows for calculations to be made on variables as selected and input by the user. All products will list the LVR with the product and rate which are clearly published on the Product Provider’s web site. Monthly repayments, once the base criteria are altered by the user, will be based on the selected products’ advertised rates and determined by the loan amount, repayment type, loan term and LVR as input by the user/you. *The Comparison rate is based on a $150,000 loan over 25 years. Warning: this comparison rate is true only for this example and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate. Rates correct as of June 26, 2022. View disclaimer.
Home loan rate rises a sign of things to come?
Speaking of neobanks, Adelaide Bank (which shares an ADI licence with Up Bank) raised two home loans by 54 basis points today, or a little over half a percentage point.
These rate rises were:
- Owner Occupier SmartFix P&I 5 Years: Up to 2.88% p.a. (3.02% p.a. comparison rate*)
- Owner Occupier SmartSaver P&I 5 Years: Up to 2.88% p.a. (2.83% p.a. comparison rate*)
'SmartFix' and 'SmartSaver' home loans fixed for four years were also raised by 29 basis points, and the SmartFix and SmartSaver products fixed for four years for investors were raised by 10 basis points.
These rate rises, while from just one lender, could be a sign that banks are predicting a rate rise sooner than the Reserve Bank has said.
Positive jobs data released yesterday, up to pre-COVID levels, is one factor in financial markets 'pricing in' at least one 25 basis point rate rise by the end of next year and an additional hike in 2023, according to the Australian Financial Review.
The Reserve Bank's Term Funding Facility is also set to be re-tooled from July, ending billions in low-cost funding for banks, which some pundits predict will spell an end to 'record low' fixed home loan rates.
With that said, it was a busy week for home loan rate cuts, with NAB, and Homestar slashing interest rates on fixed products.
Photo by Karla Hernandez on Unsplash
