Brokers are learning more about the variety of products on the market according to one non-bank, which has seen great growth through its broker channel.
Backed by the South Australian government, HomeStart offers loans to first time buyers who are struggling to get into the property market.
While the company admits it is not the cheapest option out there, it prides itself as a ‘stepping stone’ by offering deposits as low as 3% and no lenders’ mortgage insurance. Once the borrower has built up equity in the property they are able to move on to other lenders and cheaper rates.
In 2015, the non-bank was seeing around 33% of business through the broker channel. This has grown to more than 50%.
HomeStart has expanded its broker channel to continue this growth, now with around 540 brokers and three BDMs.
Deborah Dickson, head of retail at HomeStart Finance, said the most important thing was to understand the particular market the products cater for, but that brokers are “doing a great job” of that.
HomeStart’s products do not have a fixed term and repayments are set based on what the borrower can afford. To ensure these payments stay the same, they are indexed according to the consumer price index every 12 months.
Dickson added, “Brokers are actually becoming more aware of where we fit in the market place. So the number of first time buyers we’re getting is increasing enormously and consistently so I think there’s a better understanding of the fact that we’re a stepping stone.
“I think the broker channel is crucial because it provides us with a far wider footprint, it allows us to offer the product far more widely than we could on our own. And it’s a genuine alternative offering that brokers really should have as part of their product set.
“The key thing is that with our product, rather than turning a customer away that doesn’t have a sufficient deposit or doesn’t have that purchasing power under a major lender or even a non-lender, they can actually get them in.
“So whilst we don’t pay the commission levels that others do and our product is priced at a higher interest rate than other products available on the market, the fact is that our products allow people to get in. So rather than a broker saying no to a customer, they can say yes and then move them later.
“For HomeStart, that’s a job done. We’ve expanded the total size of the market. We’re not out to compete directly with lenders, we service a portion of the market that can’t get into finance elsewhere.
“More than 90% of our customers in our history would not have been able to get finance through other lenders. That’s not to say they are risky customers, it’s just they are in a position where they either can’t get the upfront deposit sorted or they don’t have the purchasing power.”
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