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One of the country’s most prolific mortgage brokers has said that brokers are increasingly opting to write their business with non-bank institutions, which are becoming “more relevant” for those looking to reprice loans.
Mark Davis from the Australian Lending & Investment Centre (ALIC) recently told The Adviser’s Elite Broker podcast that non-banks’ pricing and rates have “become more relevant in the last six months”, and are particularly attractive for loan repricing.
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According to the elite broker, the current lending environment and associated low interest rates make it attractive for customers to switch to a lower-rate mortgage. However, he revealed that many of the major banks “hit the roof” when brokers reprice their books, as they are “taking [the banks’] margins away from them”.
“We’re now in a situation where you have to reprice or lose your clients, so it’s a bit of a catch-22,” explained Mr Davis.
“Obviously we can’t advise what the rates are going to do, but my gut feel[ing] is … the banks are going to continue to be harder to work with, as far as getting a deal to happen.”
Sharing loans with non-banks
Provisional results from Momentum Intelligence’s Third Party Lending Report: Non-Bank Lenders 2017 showed that brokers rated non-bank BDMs higher than their banking equivalents, giving them a score of 4.01 out of 5 as opposed to the banks’ 3.93 out of 5, and demonstrating their growing popularity among brokers.
Mr Davis noted that his own business has been “forced to become more rate-driven” to appease clients, and that the ALIC has been sharing “a huge amount” of loans with non-bank institutions.
He said the emergence of these non-banks is “fantastic” and that the choice to write loans with these lenders is down to a number of factors.
“The service levels can be stronger through the non-banks, the rates are better and we can have better communication,” he explained. “That’s what we need, as a business, to write the volumes we do.
“If we’re getting that from the second-tiers and the mortgage managers, that’s gold.”
Mr Davis concluded that the major banks will need to nurture a “better, nicer relationship under the old style of banking” to make themselves more approachable.
He said: “The larger banks will lose market share incredibly if they don’t change back to the way they were and be more personable.
“Before, we had an attitude [of]: ‘Why would you use anyone but the majors?’. Now the attitude’s changing, [and] I think it is for a lot of the 12,500 brokers out there.”
[Related: Are non-bank BDMs the best for brokers?]
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