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New online mortgage platforms do not work with “top-tier” banks and have “very small, very limited” lender panels, warns one peak industry body.
Following the launch of online mortgage platforms like Joust, uno and Hero BroKer, The Adviser asked the FBAA’s Peter White for his thoughts on these new competitors.
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While he acknowledged that competition is “good” for the third-party channel, Mr White said he was “concerned with a couple of things”.
“Some of the ones that I’ve had a look at infer that they represent everybody, yet they only have a very small, very limited amount of lenders that sit underneath them,” he said.
“The lenders that are there are not top-tier lenders and are quite often, not being disrespectful, mutual or the second-tier lenders. Quite often there is only a handful of them. When you read their messages you would think they represent 30 or 40 lenders. They need to make sure they have their message on target otherwise they will potentially run the risk of recourse form the regulator. They are in infant stage.”
Seven regional banks and mutual lenders are now distributing home loans through Joust, a South Australia-based platform that connects lenders and customers via a live auction process.
In May, Adelaide Bank, Beyond Bank, People’s Choice Credit Union and BankSA joined Bank of Queensland, Gateway Credit Union and Australian Unity as “foundation lenders” on the new platform.
Joust founder and former big bank executive Mark Bevan said one of the reasons the lenders have responded so well to the platform is because it allows them to tailor it to their own growth strategies, rather than just taking on all customers with a volume lever.
“Lenders have become very comfortable with our business model in that it is not disruptive to them,” Mr Bevan said. “We would certainly be targeting those vanilla, prime customers who may be going through a broker to create some competitive tension.”
“We think we can do that more effectively on our platform and give the banks the benefit of being able to compete on a lower cost origination basis.”
Joust has deliberately targeted challenger brands rather than the big four. According to Mr Bevan, the start-up has seen the strongest engagement from non-major lenders and mutuals.
“The challenger brands and the mutuals and credit unions who have got growth aspirations weigh up a broker strategy and when they take a closer look at it they just see how crowded and expensive and difficult it is,” he said.
“A possible digital disruption play like ourselves is a low-cost way of opening up a level playing field and new origination source.”
Meanwhile, QT Mutual Bank revealed in April that its merger with RACQ is a “strategic decision” to avoid the third-party channel.
QT Mutual Bank chief executive Steve Targett told The Adviser brokers are not part of the group’s plans.
“We are probably quite old-fashioned as organisations and think that we can penetrate that market direct,” Mr Targett said.
“We don’t use [brokers] at the moment. Part of the reason we haven’t done it is because there is certainly a cost associated with doing that. We felt at our size we wouldn’t get the quality of business we wanted and so what we have done is tried to focus on doing our relationship management direct,” he said.
“There is a price associated with it both in terms of the margin you pay, the trail, the internal costs and you’re not guaranteed to get the quality end of the business.
“We have strategically decided to stay out. A lot of people have dipped their toes in because they can’t find growth any other way. We have worked really hard to find the right merger partner so we don’t have to go into the broker market.”
[Related: Banks join online mortgage platform that bypasses brokers]
