In a finding that is unlikely to bring much New Year joy to the non-bank sector, research commissioned by the Australian Mortgage Council in 2007 has revealed that 31-per cent of consumers would feel ‘uncomfortable’ to ‘very uncomfortable’ obtaining a loan through a non-bank lender.
Alan Shields, research director at Retail Finance Intelligence (RFI) which undertook the research, cited general market unrest and damning media coverage of RAMS Home Loans’ woes as key contributors to consumers’ negative perceptions of the non-bank industry.
The inaugural survey canvassed the views of 2,000 respondents on a broad range of financial topics, unearthing their hopes, fears and general attitudes towards finance, lenders and debt.
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Of the 31 per cent who claimed to be uncomfortable with using a non-bank lender, fear was at the heart of their responses, with 70 per cent saying they worried they would lose their homes if a non-bank lender went bust.
Shields said the finding highlighted obvious gaps in consumers’ understanding of the sector.
“This was a surprising result,” he said. “The [non-bank] lending industry is very complex and clearly there is a lot of consumer ignorance surrounding it.”
While the sector continues to grapple with consumer perceptions, activity in the sector has also slowed.
The number of owner-occupied dwellings financed by the non-bank sector fell by 13.5 per cent in October 2007 compared with September, according to ABS figures released in December.
Murray Cowan, managing director of Better Mortgage Management, said his business had seen fewer loan applications recently but pointed to the Federal election as a cause of some disruption.
Cowan said Better Mortgage Management was looking closely at how to respond to borrower concerns and changing market conditions.
“We’ve started thinking about strategies,” he said.
“We’ve added extra staff to help with customer service – [we’re] taking pro-active steps to help educate our customer base.”
Despite the current funding climate, Cowan remains positive about the non-bank sector’s ability to compete in the long-term.
“The banks are slowly catching up with interest rates. With a more level playing field the non-bank sector will be able to re-gain traction in the market place,” he said.
