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The founder of an online mortgage marketplace says there is too much “fat” in the home loan value chain and believes there is space for a non-advice model in mortgage distribution.
Joust managing director Mark Bevan, who worked at CBA and Westpac before launching the online mortgage bidding platform in 2015, said that Joust is focused on lowering the cost of origination for lenders and borrowers.
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Joust targets Australian borrowers with good credit scores and simple needs. While he understands that customers with more complex needs will require the services of mortgage brokers, Mr Bevan believes that his model offers a cheaper alternative to traditional third-party distribution.
“The mortgage broker channel needs to be undercut,” the managing director said. “Excessive front-end fees and trail commissions represent way too much fat in the home loan value chain.”
However, Mr Bevan stressed the importance of mortgage brokers to certain customer segments. Just as mortgage brokers provide a choice of lenders, he believes customers should be able to choose how they source their home loan. He added: “The future is to give consumers the choice of an advice model and a non-advice model.”
Joust, which operates an online bidding service that drives down rates for borrowers, now boasts a panel of 16 lenders including St George Bank, BOQ and Pepper Money. Mr Bevan said that more than a third of the lenders on the panel are happy to undercut their first and third-party channels.
“Some banks remain resistant to differential pricing by channel and by risk and by customer value,” he said. “These banks won’t be able to enjoy any success with Joust.
“However, banks who understand their cost of acquisition are embracing differential pricing and enjoying excellent results on the Joust home loan platform.”
Mr Bevan warned that if lenders don’t “come to terms” with differential pricing, they will be “clinging to the hope that the Australian home loan market remains opaque and confusing so they can compete”.
Banks are now starting to distinguish between Joust and other online models — such as LoanDolphin, uno and HashChing — as the all-encompassing “fintech” label gradually loses its lustre.
“What lenders can now see is that Joust is actually about a lower cost of origination,” Mr Bevan said. “We understand that some customers want advice because home loans have become more complex. But we also know that plenty of people don’t require advice.”
Mr Bevan pointed to CommSec’s disruption of the stock-broking industry in the 1990s as proof that Australians are willing to make major financial decisions without the help of a broker.
“Plenty of people buy $100,000 worth of shares without needing any advice just by doing their own research. Now they can do that through CommSec for $30.
“Twenty years ago, they had to front-up to a stockbroker who would tell them to buy ten thousand BHP shares for an astronomical fee,” he said. “We are all about removing unnecessary costs from the mortgage value chain.”
Joust has been active in the mortgage markets of South Australia, NSW and Victoria and is eyeing an overseas expansion.
Meanwhile, Mr Bevan confirmed that the group has appointed advisory company Moore Stephens to kick off a capital raising that is expected to be completed by the end of the year.
