The third-party channel believes non-major banks are performing more strongly than major banks and non-banks, according to major research, with six non-majors rated more favourably than their big four counterparts.
Over 1,000 mortgage brokers took part in Momentum Intelligence’s Third-Party Lending Survey 2019, which was conducted over February and March this year.
The survey asked brokers to rate the performance of residential mortgage lenders (both banks and non-banks) across 17 attributes covering product, support and technology.
Since the last Third-Party Lending Report was released, the lending landscape has been shifting. In early February 2019, the final report from the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry was released, bringing to a head a year of hearings and putting forward 76 recommendations to improve the finance market.
Given the scrutiny that the banks (and major banks in particular) were put under over the past year, it is perhaps unsurprising that they reduced their risk appetites and began “simplification” strategies. Borrowers quickly found that they weren’t servicing for loans that they had previously qualified for. And brokers began turning away from majors and towards non-major banks and non-banks to find solutions for their clients.
Looking at recent AFG figures, for example, in the quarter ending 31 March 2019, AFG brokers lodged 58.6 per cent of their loans with the big four banks, down from 63.2 per cent in the same period the prior year.
Conversely, the market share of non-major banks increased from 38.6 per cent to 41.4 per cent over the same period. As well as providing solutions for borrowers, the non-major banks were also particularly vocal in expressing their support of the third-party channel and the current remuneration structure during the royal commission.
Given this context, it is perhaps unsurprising that when Momentum Intelligence launched its annual survey of broker attitudes to mortgage lenders, the Third-Party Lending Survey, in February and March 2019, brokers responded in their droves to outline what they thought about the mortgage lenders that they had worked with in the past year.
More than 1,600 responses were received over the two months, resulting in a record useable sample of 1,008 brokers. Now in its 10th issue, the survey forms the backbone of the Third-Party Lending Report. But this year, the survey and the resulting report went under a major revamp.
Following broker feedback, the survey and report were amalgamated to cover major lenders, non-major lenders and nonbank lenders in one survey (rather than in three separate surveys).
Speaking of the decision to change format, Momentum Intelligence lead analyst Michael Johnson said: “Brokers are busy people, and we just wanted to make sure that we captured their attitudes, thoughts and priorities about the lenders and put that into a succinct and single source.
“The primary thing that we’ve done this year is put all the mortgage lenders into one large list and allowed brokers to select the ones that they’ve worked with over the last 12 months and for those to be rated across 17 different attributes classed into three groups: product, support and technology.
“Ultimately, the purpose of this report is to make the lives of mortgage brokers easier, and the way we are trying to do that is by making it easier for lenders to understand what they need to do when interacting with this market. So, for us to do that, we’ve completely revamped how we deliver this report, and it’s largely done online within a digital platform that allows lenders to compare themselves against all the other lenders.”
Rating the non-major banks
After collating a list of 30 mortgage lenders, Momentum Intelligence asked brokers to rate the lenders they had used in the past year on a scale of 1 to 5 – with 1 being “below average” and 5 being “above average” – for each of the 17 attributes. These scores were then tallied to give each lender (which received more than 20 responses) a score out of 100.
For the first time this year, the report shows the rankings for authorised deposit-taking institutions (ADIs) as a whole – including both major and non-major banks – as well as rankings for the non-ADIs (non-banks).
Number 1 - Bankwest
Completing a hat-trick this year is Bankwest, which was rated as the best-performing non-major bank for the third year in a row – and this year also topping the new ADI ranking as a whole too. Bankwest’s overall score came to 75.76 out of 100 – a phenomenal achievement.
While Bankwest’s parent company, CBA, was the second lowest-rated bank (coming ahead just a few points clear of Bank of Queensland) in the ADI ranking, the smaller bank brand was rated highest for 11 of the 17 categories.
According to brokers, Bankwest’s staff were its leading light – with the rating for its business development managers (BDMs) outranking that of any other bank (and being the highest-rated attribute for the brand) with an average of 4.2. The score was also an improvement on its score for BDMs last year. Credit assessment staff were also the second most highly rated of any bank (behind MyState Bank), with a score of 3.88 out of 5.
The WA-based bank was also rated highly for its turnaround times (average score of 4.0), coming second for this category behind Macquarie Bank. Channel conflict also seems to have been reduced at Bankwest, with brokers rating this category more favourably this year.
Where Bankwest has room for improvement, though, is its commitment to the broker channel.
Last year, the bank was ranked third for this attribute, but by February 2019, it had dropped down to ninth place.
Number 2 - Macquarie Bank
Second place in the non-major bank ranking is also a non-mover this year, with Macquarie Bank being the second most highly rated non-major bank once again, this time with a score of 74.02.
This non-major is leading the way in turnaround times, with brokers giving this attribute a score of 4.08 – higher than any other bank in the ranking. However, Macquarie’s highest rating was for commitment to the broker channel, an attribute that was scored 4.19 out of 5.
Macquarie this year improved in six areas – interestingly, while its product policy moved up three places (to second), its pricing for products dropped down four places (to ninth).
Number 3 - MyState Bank
This year, third place was taken by MyState Bank, which improved in all but one category (upfront valuations dropped from 13th to 14th place) and came in with an overall score of 70.80, pushing out ME Bank from its podium finish. Brokers rated MyState’s credit assessment staff as the best in the banking sector – with a score of 3.88.
In terms of the bank’s individual performance, it was commitment to the broker channel that earned it the highest rating, coming in at 4.17. This was followed by BDMs (4.01) and channel conflict (3.93).
Special mention should also go to HSBC, which was the most improved non-major bank – having increased its ratings in all 17 attributes.
More analysis of broker sentiment towards the non-major banks can be found in the June supplement of The Adviser magazine, out now.
The full, comprehensive results of the Third-Party Lending Report 2019 are available for purchase through Momentum Intelligence. This interactive report is designed to be a detailed competitive analysis tool for lenders to view, compare and contrast their performance against the market.
Annie Kane is the editor of The Adviser, Australia’s leading source of news, opinion and strategy for mortgage brokers.
As well as writing news and features on the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker podcast and In Focus podcasts and The Adviser Live webcasts.
Before joining Momentum Media in 2016, Annie wrote for a range of business and consumer titles, including The Guardian (Australia), BBC Music Magazine, Elle (Australia), BBC Countryfile, BBC Homes & Antiques, and Resource magazine.
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