Business lending margins come in
Competition in the sluggish business lending market has forced lenders to trim their margins. Research house Canstar says the gap between home loans and residentially secured business loans has narrowed this year.
According to Canstar, in the lead-up to the financial crisis, advertised home loan rates and secured business term loan rates were the same.
By 2009, there was a 1.29 per cent average difference, as lenders adjusted the risk ratings of their business portfolios.
Canstar's head of research, Steve Mickenbecker, said that gap had halved over the past 18 months.
Mickenbecker said: "As rates moved up last year, many lenders did not increase business loan rates in line with home loans.
"More recently, we have also seen new products on the market that are aggressively trying to capture business through attractive headline rates."
One of these products is Bankwest's Business Low Rate Loan, which is priced at 7.65 per cent and is the cheapest business loan on the comparison websites.
Comparing business loan rates with home loan rates is difficult. Most lenders discount their home loan rates, but they may add a risk margin to their business loan rates.
Canstar said it was increasingly common for banks to advertise a range for business loans, so that borrowers had some certainty about what the upper limit would be.
It also found that at least one bank, Commonwealth, was discounting off the advertised business loan rate.
Commonwealth's executive general manager business product and development, Kelly Bayer Rosmarin, said: "We risk-assess our business customers. However, if the loan is backed by residential property, in most cases the rate will be standard.
"Where the rate we charge the business varies from the reference rate, the margin can be above or below."
Westpac has taken a different approach to competing in the business market. Last week it announced it would pay up to $20,000 of transition costs for business customers who moved across to Westpac and took a minimum loan of $250,000.