Are online lenders a threat to the broking industry?

by Julia Corderoy12 Feb 2015
An online lender says it has more than doubled its home loan applications since dropping its interest rate in the wake of the Reserve Bank’s decision to cut the official cash rate.

Last Wednesday, loans.com.au announced it would cut its variable interest rate to 4.23% – a full 1.42% lower than the standard variable home loan rate announced by Commonwealth Bank.

Kim Cannon, managing director of Firstmac – the lender behind loans.com.au – says the online lender has had an increase of “more than a hundred percent” in applications in week.

The move by the Reserve Bank has really shaken up the home loan market, according to Cannon, and prompted consumers to take a close look at their interest rate – especially consumers looking to refinance.

“They are refinancing in record numbers for a better deal,” he said.

Loans.com.au, which doesn’t engage in third party broker distribution, has previously told Australian Broker that consumers seeking to refinance their home loans are also ditching branches and brokers and going online to do so.

Data compiled by the online lender and released late last year revealed that 53% of customers borrowing for property were refinancing an existing home loan and were increasingly opting for “convenient” online lending.

“Borrowers who are refinancing know their way around the home loan sector; they’ve been through the exercise with their original lender,” Cannon told Australian Broker

"Online lending is an increasing threat to brokers when you consider the trajectory of other fields that follow a brokerage model of service. Look at travel agents; once, people planning their holiday would go to a travel agent who would take care of all their bookings and that would be that. Now, if people go to a travel agent, it’s often for information that they will take away and do their own bookings and make savings. There used to be a travel agent on every corner, but now they are few and far between, and mostly used for particularly complicated travel arrangements."

However, Cannon did say brokers can co-exist in this increasingly online and DIY culture if they can adapt and innovate.

Do you think the convenience of online lenders poses a threat to the broker industry? Take our online poll now.
 

COMMENTS

  • by Coast Broker 12/02/2015 9:23:20 AM

    A big fat no as they provide no customer service and no after sales service. As I say to prospective clients the biggest thing people do in life outside of relationships and children is to buy a property and therefore the next biggest thing is having the right mortgage.

  • by Awesome - Albert 12/02/2015 9:23:42 AM

    Why doesn't Kim Cannon offer the same product to mortgage brokers - if the clients really are "increasingly opting for 'convenient' online lending" then he wouldn't need the price difference in the product offering. The truth is that the low rate is main reason people use this product. Sorry but you get what you pay for and when you take the advice out of what we do, you are left with a lot of people borrowing more than they should and with loans that aren't the most suitable...

  • by Pav 12/02/2015 9:51:28 AM

    It's not about buying a $1000 airplane ticket. It's their life's savings. Smart people always wants to get best advice on different products and specially after service.
    On the same time, these online products should be offered to brokers. Online market can increase further.