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Non-banks ‘have become more relevant’, says top broker

by Tamikah Bretzke4 minute read

One of the country’s most prolific mortgage brokers has said that brokers are increasingly opting to write their business with non-bank institutions, which are becoming more relevant for those looking to reprice loans.

Mark Davis from the Australian Lending & Investment Centre (ALIC) recently told The Adviser’s Elite Broker podcast that non-banks’ pricing and rates have “become more relevant in the last six months”, and are particularly attractive for loan repricing.

According to the elite broker, the current lending environment and associated low interest rates make it attractive for customers to switch to a lower-rate mortgage. However, he revealed that many of the major banks “hit the roof” when brokers reprice their books, as they are “taking [the banks’] margins away from them”.

“We’re now in a situation where you have to reprice or lose your clients, so it’s a bit of a catch-22,” explained Mr Davis.

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“Obviously we can’t advise what the rates are going to do, but my gut feel[ing] is … the banks are going to continue to be harder to work with, as far as getting a deal to happen.”

Sharing loans with non-banks

Provisional results from Momentum Intelligence’s Third Party Lending Report: Non-Bank Lenders 2017 showed that brokers rated non-bank BDMs higher than their banking equivalents, giving them a score of 4.01 out of 5 as opposed to the banks’ 3.93 out of 5, and demonstrating their growing popularity among brokers.

Mr Davis noted that his own business has been “forced to become more rate-driven” to appease clients, and that the ALIC has been sharing “a huge amount” of loans with non-bank institutions.

He said the emergence of these non-banks is “fantastic” and that the choice to write loans with these lenders is down to a number of factors.

“The service levels can be stronger through the non-banks, the rates are better and we can have better communication,” he explained. “That’s what we need, as a business, to write the volumes we do.

“If we’re getting that from the second-tiers and the mortgage managers, that’s gold.”

Mr Davis concluded that the major banks will need to nurture a “better, nicer relationship under the old style of banking” to make themselves more approachable.

He said: “The larger banks will lose market share incredibly if they don’t change back to the way they were and be more personable.

“Before, we had an attitude [of]: ‘Why would you use anyone but the majors?’. Now the attitude’s changing, [and] I think it is for a lot of the 12,500 brokers out there.”

 [Related: Are non-bank BDMs the best for brokers?]

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