Rising funding costs, shrinking liquidity and uncertainty over broker commissions have fuelled a surge of broker applications for white labelled funds.
GE Money Third Party Solutions (GE Money) recorded a 25 per cent increase in applications from March to April this year.
Mark Rice, GE Money managing director, told Mortgage Business that he saw a direct correlation between current market conditions and the surge in applications.
“The whole industry is under pressure due to the cost of funds, and others are under exceptional pressure because of the actual availability of funds... with white labelling they [brokers] have the flexibility to insulate themselves,” said Mr Rice.
Despite the flood of inquiries, GE Money has knocked back many of the applications as the lender continues to take a conservative approach to who it partners.
“We’re keen to keep our white labelled products exclusive. We haven’t presented it to a mass audience partly because it is complicated and you need to have a certain level of experience as a loan writer,” said Mr Rice.
White labelling allows brokers to brand and price their own products through accessing wholesale funds. The loan is assessed and managed by the lender in much the same way as retail products.
One of the attractions of white labelling is the flexibility for brokers to set their own margins, which gives greater control over the commission they earn.
Geoff Wilson, managing director of Gold Coast-based mortgage manager Wilson National, said that as well as pricing flexibility white labelling offered opportunities for brokers to cross sell other products such as credit cards, leasing finance, personal and commercial loans.
“White labelling is a strategic business decision and there are clear advantages for brokers,” he said.
However, Brian Jones, managing director of Homeloans Ltd, warned brokers that white labelling is not an instant solution to commission cuts.
Without the right infrastructure and management, Mr Jones said white labelling may see them worse off than selling products at a fixed commission rate.
“I am sceptical whether white labelling is a genuine solution to commission cuts,” he said. “It may work for some, but only under very efficient delivery structures. Low margin products allow no room for inefficiency.”
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