I agree that psychiatry is not more competitive relative to other specialties, but it is becoming more competitive just as everything is becoming more competitive because of increasing # of applicants, trend toward diaspora from home medical schools (just my observation), pressure from Deans of Students to have all med students match, Step 1 score inflation, increasing importance of Step 2 (simply because it's another number), etc. With that said, here are a few observations
1) Psychiatry used to be (read: even two years ago) a specialty in which you could be a very average or below average medical student (from a non top 20ish US MD school) with nothing particularly spectacular about your application and still have a reasonable shot at interviewing and matching at pretty much anywhere except MGH, Columbia, etc. Now places like Emory, Wash U, UNC, Longwood, UTSW etc are probably more exclusionary. That said, if you go to Harvard/Hopkins/Columbia/whatever for med school and are a mediocre student, you are pretty much still competitive for anywhere.
2) The student's step 1 score will become (if it isn't already) solidified as the single most important factor (other than where the student went to medical school). Compared with 5ish years ago, every gradient is about 10 points higher (when I started med school ~220 was average, 230 was considered really good, and 240 was considered "competitive for anything") but these have since increased ab0ut 10 points in each "tier" with 260s and 270s becoming much more common. With more people pounding through UWorld multiple times and verbatim memorizing first aid, the scores will keep going up. And with more and more applicants, PDs will have less time to read through apps thoroughly and will rely more and more on the score itself, at least for offering interviews.
3) More and more MDPhDs are going into psych, and these applicants are on a whole different level of competitiveness, irrespective of medical school performance (though many I know from med school and residency were AOA and had excellent scores)
So yeah, don't blow off Step 1 as "Im going into psych so it's not important), and as other people mentioned, take Step 2 (BOTH CS AND CK) early!