A stale mortgage tale

True to form News, Fairfax, ABC, and all media wrote the mortgage rate rise story this summer to the usual formula.

Bank A raises rates; Bank B follows their lead, and, surprise, Banks C, D and E follow. All earning progressively slimmer notices that they did so.

Since banks broke the home loan rate rise formula this summer in the detail of the price moves, the formulaic story accommodated the fact.

For once, there was a discrepancy in the rate rise; though why was something most reporting didn't address.

Yet this summer's belated mortgage rate hike shed vital clues on the state of banking.

NAB, the third force in the mortgage market, has to have been a reluctant first mover, a role the bank hasn't played in retail banking for years. And the timing and the price chosen hints at the compromised approach to decision making at the bank.

An emboldened ANZ, which is a distant fourth, followed with 20 basis points. ANZ will use the extra spread to fund a few extra basis points on commissions for selected mortgage managers, and thus help fix below system rates of growth in its mortgage book. So at least they have plans.

Commonwealth Bank's new retail bank management team may have the luxury of unchallenged market leadership but doesn't appear much used to this repricing ritual, adding 10 basis points on home loans funded under its primary brand (but double this on the bank's HomePath brand).

St George, the number five lender, embraced the ANZ lead by adding 20 basis points to its standard home loan rates, a rate rise its new CEO had said the bank wouldn't adopt.

Westpac, ranked second, then added 15 basis points as did regional banks Suncorp and Bendigo and Adelaide Bank (with the latter taking the opportunity to align pricing on its two retail brands).

Above all, banks clarified over January that there was nothing strategic and not even anything much coherent in the 25-week wait to adjust mortgage pricing to reflect the credit market shock of August 2007.

The business models of numerous competitors are in a weakened state and bank management teams, having surrendered margin for half a year, won't wear any more short-term pain.

Aussie, Bluestone, Challenger, FirstMac, GE Money, GMAC-RFC, Liberty, Macquarie Securitisation, Members Equity, Pepper and Resimac thus all earned a little breathing space in a rough market as banks muddled their way to a new price point earlier this month. An army of mortgage managers and intermediaries who've tied their success to these brands and their ilk have to be thankful that short-term filters rule decision making at their chief competition.

Failures and takeovers of entities whose financials or investors have gone sour have to be on the horizon.

The likely crash landing of scores of lesser mortgage entities just won't occur as soon as they might, given the cartel's lack of coordination and spine.