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Banks (Finance)

Life Insurers Enter Home Loan Market, Putting Pressure on Banks

Strategic Insights

— 1 min read

The life insurance industry is entering the Australian home loan market, with National Mutual set to offer home loans "at competitive rates" from 1 January. National Mutual's move is likely to put pressure on banks to keep home loan rates low, as consumers will now have more options. The move also marks a significant shift in the market, as life insurers have traditionally focused on providing life insurance and investment products.

Key Takeaways:

  • National Mutual, a Melbourne-based life giant, will offer home loans from 1 January, with competitive rates.
  • The life insurer has set aside $100 million for the new loans, with plans to increase this amount as necessary.
  • National Mutual's head of Australian operations, Mr Tony Killen, has stated that the company's rates are unlikely to be as low as those offered by its recently launched ACTU scheme, which lends to industry superannuation fund members.
  • The AMP Society, National Mutual's main competitor, has also announced plans to begin selling home loans through its agents in Sydney and Canberra, undercutting bank rates by about one percentage point.
  • The Federal Government has criticized banks for passing on the full amount of interest rate rises to borrowers, making the entry of the life insurers into the home loan market a welcome development for consumers.
  • Existing National Mutual customers will be the focus of the company's initial efforts.
  • Aussie Home Loans, an aggressive newcomer, had previously increased its interest rate by only 0.35 of a point to 7.5 per cent.

Statistics:

  • National Mutual has set aside $100 million for the new home loans.
  • The life insurer plans to increase this amount as necessary.
  • National Mutual's ACTU scheme lends to industry superannuation fund members at rates more than one percentage point below prevailing rates.
  • The AMP Society plans to undercut bank rates by about one percentage point.
  • The ANZ and Westpac lifted their interest rates by 0.75 of a point to 9.5 per cent, while Aussie Home Loans pushed its rate up by only 0.35 of a point to 7.5 per cent.

Sources:

  • National Mutual
  • AMP Society
  • Federal Government
  • Aussie Home Loans
  • ACTU scheme (no date available)

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