Rural customers often have “blind loyalty” to one lender, so brokers need to “keep the banks honest”, Loan Market has said.
Peter Camphin, Queensland state director of Loan Market, told The Adviser that rural borrowers often have generational relationships with banks that can be four generations strong. As such, it’s important that brokers are available to help clients shop around.
“If it's a rural property that's been in the same family for four generations, you can almost guarantee that they would've been with CBA, or NAB, or Westpac, or Bank of NSW since time immemorial, and we're finding that a lot of the times they're not really getting the best treatment in terms of the cost of their finance that we can give when we shop them around,” Mr Camphin said.
“It’s an area that we're very keen to participate in and we've started that process now with our Ray White rural businesses in creating the relationship between broker and agent.”
Loan Market is currently in the early stages of a rural expansion strategy, with starting points identified in Queensland’s Emerald and beef-capital Rockhampton, and Yass, Tamworth and Bathurst in NSW.
“What we're doing is building relationships between the Ray White rural agencies and livestock agencies as well as property agents to provide mortgage broking services to their clients,” he said.
Given the legacy relationship between rural borrowers and their banks, brokers need a “warm introduction” to potential clients which can be provided via agents, the director added.
He explained: “[Trying to] put every one of them [the brokers] into a little country town across the country is not going to work because the business is going to be difficult to attract because of relationships with banks.
“The loyalty that rural people have for their banks is really very strong. Most of them don't realise that they're maybe not being as well looked after as they may have anticipated they should be or what they think they are.”
The director believes that when it comes to the percentage of mortgages that are broker-introduced, the 53 per cent figure that is often quoted for Australia as a whole is a lot lower in rural areas. It’s a niche area and one that Loan Market is “keen” to tap into.
“We see that that [rural sector] is a marketplace that’s been — not forgotten — but it’s a specialist area and you’ve really got to know what you’re doing.
“Part of the Loan Market growth [strategy] is around partnering with Ray White so that it expands the offering that they have. If you look at agency practice — whether it's in residential, commercial or rural — it’s that agents are now realising that in the past they could assume that some clients were credit-worthy, but it's not always the case.
“They're realising now that having a good working relationship with a broker means that they can get better-qualified buyers and know what the position of the buyer is before they actually put them in the car and show them something.”
Commenting on the different skills a rural broker needs, Mr Camphin said that successful rural brokers need to understand the way banks work with rural clients. The better brokers will have an understanding of the ways livestock and wheat prices can impact the value of a productive broad acre property.
He added: “We're not dealing with people trying to buy houses; we're dealing with people who've got an interest in income-producing rural properties.
“It's really important that we find the right people and place them in a relationship with the right offices.... It's a shift for us, but it's certainly an area and a marketplace that we think we can have a great impact in and on.”
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