Non-banks eclipse majors on value

by Julia Corderoy11 Jul 2016
A new analysis highlights the growing disconnect and dissatisfaction of the major banks when it comes to the $1.4 trillion mortgage market.

Nearly 9 in 10 (88%) of the best value home loans in the mortgage market right now are from small and non-bank lenders, according to an analysis by comparison site Mozo.com.au.

The analysis compared 392 home loans from 86 lenders and Mozo director Kirsty Lamont said the major banks hardly rated against the best value fixed, variable and full feature home loans in Australia.

“Smaller lenders are now competing with the big banks on more than just rates and it’s hurting the Big 4’s share of the home loan market which has shrunk by 1.6% in two years. This equates to a hefty $32 million in loans lost to smaller lenders each day,” she said.

Ray Hair, general manager of national sales at non-bank lender HomeLoans told Australian Broker the non-bank sector provides “choice, competition and individualised service” in a market dominated by the major banks and their subsidiaries.

“Non-bank lenders can provide competitively priced mortgages and, importantly, they often meet the needs of borrowers who do not fit the mainstream lenders’ criteria,” he said. 

“Competition and choice are important for consumers in a market that is not always easy to understand and compare. It is, however, the individualised service proposition that really differentiates non-bank lenders; the capability to provide a solution rather than decline a loan because it is outside the square in terms of the borrowers’ history, current position and objectives.”

Tim Brown, the CEO of lending at Yellow Brick Road (YBR) said the analysis highlights the opportunities for brokers – who have historically been credited for providing consumers choice outside of traditional lenders – particularly in certain hard-to-service niches. 

“Non-banks play an important role in ensuring the home loan landscape stays competitive and often offer more attractive rates in niches were banks have traditionally over charged, such as investment loans or first home buyers,” Brown told Australian Broker.

With recent hints from APRA that banks may have to further increase their capital buffers this year, Brown said the non-bank proposition may only get stronger.

“A lot depends on how much Capital APRA requires the traditional banks to hold against their home loan portfolio.

“Any increase in Capital would require the majors to increase rates above the non-banks which would give them a funding advantage they haven't enjoyed for some time. This could lead to non-banks offering even lower rates to the market in 2017.”
 

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