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Brokers in demand amid rise of 'fifth pillar'

Yellow Brick Road and Macquarie have joined forces to offer a new range of mortgage products - and more competition in the banking sector is good news for brokers. We speak to Stephen Moore of Choice Aggregation Services and Patrick Tuttle of Pepper Home Loans for their thoughts on the so-called fifth pillar.

Video transcript below:

Donna Sawyer, Australian Broker TV
Donna Sawyer:
 Mark Bouris and Yellow Brick Road make headlines again and this time it has nothing to do with celebrity apprentice. Bouris’s business will be offering a new range of Macquarie backed mortgage products as it attempts to surge ahead in the home loan market.  Stephen Moore of Choice Aggregation Services says time will tell how successful the play is, but on the face of it, the strategy is sound.

Stephen Moore, Choice Aggregation Services
Stephen Moore:  The strategy is really one of white labelling, so you know whilst it’s certainly a new or ground breaking strategy, look it really is a well proven one and our experience with white labelling has been fantastic.  There is very strong, both broker and consumer demand in the market for alternate brands.
Donna Sawyer:  But are we seeing the dawn of a fifth pillar in the banking industry as some reports have touted.  Patrick Tuttle of Pepper Home Loans says the game is a bit tougher than that.
Patrick Tuttle, Pepper Home Loans
Patrick Tuttle:  There is a lot of headlines around you know an upfront interest rate, you know 1.15% below the banks.  I guess it will come down to how many borrowers actually qualify for that product, the flexibility, product features, does it really you know attack the bank’s [heartland].  But you know it’s good to have competition in a branch network away from the major banks.  So I think it’s a good thing for the market.  Game changer probably too early to say, but certainly we welcome more growth of the non-bank sector, you know YBR being a player in that space, obviously it’s in Pepper’s interest as well to see the non-bank sector grow.
Donna Sawyer:  The prospect of further competition is also welcomed by Stephen Moore.
Stephen Moore:  Now more than ever competition is alive and well in banking.  We are seeing fierce competition for deposits.  We are seeing you know very strong competition when it comes to lending and it’s actually exacerbated on what’s happening in the credit markets.  You know we are in a low credit growth environment and that’s further driving competition.  
Patrick Tuttle:  I think it’s very difficult for the mutuals and regional banks to compete against the majors and that’s why it will be interesting to see how Yellow Brick Road goes.  Because the banks cost of funding is so much cheaper.  When you take in your deposit funding, their mix of covered bond funding, how efficiently they can securitise relative to non-banks, that remains the issue.  So for genuine competition in the prime market, I think we are a long way away from moving the dial away from the four majors market share.
Donna Sawyer:  What does this all mean for the broker?  More market players serve to increase the broker’s value proposition. 
Stephen Moore:  There is a fair bit of confusion in the eyes of consumers.  Special deals, offers, new products, in the eyes of consumers, it’s confusing to know what is the right, not only right product, what’s the right lender for me.  So now more than ever, importance of the broker role comes into play.  You know the trusted advice that brokers can provide are now more than ever important going forward to consumers.
Donna Sawyer:  This is Donna Sawyer reporting for Australian Broker TV.