Australia's non-bank lending sector needs to re-define itself if it wants to remain relevant to the mortgage industry — starting with the term 'non-bank'.
This is the growing sentiment being felt across the industry.
Steve Weston, general manager for distribution, product marketing and commercial lending at Challenger Mortgage Management, says a re-think of what it means to be a 'non-bank' lender is long overdue.
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"The term 'non-bank' isn't suitable because it doesn't reflect what companies do, and more importantly, how they finance their loans," says Weston.
Westpac's October acquisition of the RAMS brand and franchise network is a recent example of how consolidation and change in the industry is putting pressure on the non-bank sector to clarify its scope and service offering.
The term 'non-bank lender' may have suited pioneers like Aussie and Wizard, but according to many in the industry, it no longer accurately describes the bulk of mortgage businesses in Australia.
Others argue that the use of the term 'non-bank' — particularly in the media — to describe industry stakeholders ranging from mortgage managers, originators and securitised lenders to private lenders and brokers, has not only caused confusion among consumers but has also led to true non-bank lenders being given a bad name.
Recent events in the US have arguably compounded the problem, with the Australian media frequently confusing prime lenders with non-conforming lenders in the non-bank sector.
According to Weston, this confusion not only has implications for consumers, it leaves the sector vulnerable to competition.
Lisa Montgomery, national manager of Resi Home Loans, agrees, saying the industry needs to address the issue by educating both the media and consumers about what it means to be a non-bank lender.
"It's just become a melting pot," Montgomery says.
"The industry is floundering because of a lack of consumer understanding, and the banks are using this as an opportunity to slam the sector," Montgomery says.
MFAA CEO Phil Naylor is another who sees the need for greater clarity around "who's who" in the mortgage industry zoo.
"There are many different animals operating in this sector, and they each need to find their natural home," Naylor told Mortgage Business.
