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A move by Coles into the mortgage market has been tipped to be good for brokers, good for borrowers – but terrifying for banks.
There has been renewed speculation about Coles moving into mortgages after the supermarket giant announced a joint venture with GE Capital.
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The deal, which is subject to regulatory approval, would see the two firms combine to offer credit cards and personal finance products.
It comes after Coles engaged a third-party distribution specialist to evaluate plans to enter the mortgage market.
A Coles spokesperson told The Adviser that there were no immediate plans to diversify into mortgages – but left the door open for a future move.
“Initially, our joint venture with GE will focus on growing the existing credit card business and then look at other consumer lending such as personal loans. We have no plans to offer mortgages at this stage,” the spokesperson said.
Mark James from data management firm GJI said the banks should be “scared sh**less” by the thought of Coles moving into the mortgage market.
He said that Coles would be able to pick up a lot of data from its credit cards and insurance products, and to a lesser extent its supermarket checkouts.
“Coles and Woolworths and those sorts of retailers have been very good at utilising data, mainly because they invest in it and have got the budget to do so,” he told The Adviser.
Mr James speculated that Coles would do to the home loan market what it had done to the petrol market – cross sell to customers and undercut rivals.
“The bottom line is: people don’t care where they get their home loans from, they just want it to be cheap,” he said.
“They are going to be a substantial force. Even if they get it wrong, they’re going to get it right, because they’re going to be disruptive. The market is desperate for an alternative.”
Meanwhile, Freedom Home Loans owner Troy McErvale said brokers would likely benefit from Coles moving into mortgages because it would probably use the third-party channel.
Mr McErvale said borrowers would also win because Coles would force banks to work harder to win their business.
“I think it might force the existing lenders to sharpen their own processes a bit more, to focus more on customer retention policies, to improve product innovation and improve post-sale service,” he told The Adviser.
