POINT BLANK -- Standing strong

Despite being hurt by the GFC, Carrington National's chief executive officer Gino Marra says the non-bank sector has now fully recovered and is stronger than ever.

HOW HAS CONSUMER SENTIMENT CHANGED TOWARDS THE NON-BANK SECTOR OVER THE LAST 18 MONTHS?

The banks have done a great job of beating up the non-bank sector. They also did a wonderful job of pulling the wool over the eyes of brokers and consumers. They went out there and said non-bank lenders were unreliable and consumers would be wise to "bank with a bank".

Now, however, the banks are driving rates upwards out of cycle with the RBA. Because of this, I believe consumers and brokers are starting to realise that they are better off using the services of mortgage managers, non-bank lenders and smaller building societies.

WILL THE NEW CREDIT LICENSING LAWS HAVE A SIGNIFICANT IMPACT ON YOUR BUSINESS?

Just over a year ago, we stopped dealing with individual brokers that were not associated with an aggregator or sizeable brokerage because we found that they were contributing a lot to our growing arrears problem.

I think the National Consumer Credit Protection Act (NCCP) will wipe out the rest of individual brokers that don't have the ability to run a business. You really need the support, and I think unfortunately the majority of the one man bands will not survive. That said, there are some very good one man bands out there, but I believe the regulations surrounding licensing will be the final nail in the coffin.

My gut feeling is that five percent of the market will disappear. While some people say it could be as much as 15 per cent, I do not believe it will be that high.

Of course, we are not the first lender to limit who we deal with.

Banks have long said that they will only deal with accredited brokers. From our perspective, we will only deal with brokers that have a licence and we have chosen to do that in order to ensure that everything works well for us in the future.

I believe licensing will help mortgage brokers become more respected. In the same way that licensing helped financial planners be seen as ‘professional', the same thing will happen to brokers. It will be a harder industry to get into, but those that do will flourish.

WHERE ARE YOU PREDOMINATELY GETTING YOUR BUSINESS FROM?

Ironically, the majority of our business is coming through brokers who wish to refinance their clients out of the banks.

In fact, almost 90 per cent of business comes from refinancing. At the beginning of the GFC, we saw a lot of mums and dads refinance out of their mortgage with a non-bank lender in order to realign themselves with the perceived security of a big bank.

However, those borrowers soon discovered that the service from the banks did not match that of the non-bank lenders, and as such they are now going back to smaller lenders.

The banks have been reckless over the last five years. When a client comes to us looking to refinance out of their current home loan, we inspect their entire financial situation.

From this research, we can see that some banks are freely handing over credit cards that are $20,000 or more. The average consumer today has four to five credit cards with a limit of $12,000.

The other day, I had a client who had $80,000 worth of credit cards with one of the majors.

This particular bank was charging the client 2.5 per cent interest, which equates to $2,500 per month, which was on top of their $1,800 per month mortgage repayments.

Everyone talks about non-conforming and specialist lenders causing problems in the market place, but the banks cause just as much grief, if not more, due to their reckless behaviour and the way they dole out credit cards.

AT THE BEGINNING OF THE GFC, MANY CONSUMERS WERE PUSHED TO USE THE SERVICES OF THE BIG BANKS FOR SECURITY. DO YOU THINK WE ARE BEYOND THAT NOW?

I think we are. The federal government, through the Australian Office of Financial Management, is providing significant levels of funding to non-bank lenders, which gives us the ability to compete on interest rates.

At present, we are 80 basis points below some of the majors on their standard variable home loan products. Our money comes from a AAA rated source - the banks do not have the AAA rating.

HOW HAS THE GFC CHANGED CARRINGTON NATIONAL'S APPROACH TO LENDING?

The GFC definitely had a dramatic impact on the way we lend. Today, instead of offering products that are not well understood by the wider public, we are offering vanilla products that are more saleable.

For example, we have now stipulated that the maximum LVR for our low doc product is 80 per cent.

Previously, we would have offered a low doc with a maximum LVR of 95 per cent; however, we would have requested that borrowers provide us with BAS statements. Today, we will go to 80 per cent and do not require borrowers to prove their income with BAS.