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GE Money’s unceremonious dumping of its Australian third-party distribution channel has tarnished the non-bank sector’s reputation. But it should not stop brokers from supporting what is an essential segment of the mortgage industry.
Competition is critical for the health of the mortgage industry – for both borrowers and brokers. But the last 18 months have left the industry looking decidedly out of balance with the banks, which now account for as much as 95 per cent of all new business.
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In the past the non-bank sector has done much for the broker channel.
Most product innovation has stemmed from mortgage managers and there is no question as to the impact the rise in non-bank lending has had on the interest rates brokers now deliver.
Events over the last 18 months have seen mortgage managers fall from favour nonetheless.
First was the misconception that it was the non-banks who were the only victims of the US liquidity crisis, followed by the impact of the rising cost of funds on the pricing of many non-bank products.
Over the last year most aggregators I have spoken to say that they support the non-bank sector but are concerned about its ability to compete with the banks on price.
Well, times have changed and many mortgage managers’ rates are now largely back on par with the banks.
At the end of the day it will be the brokers who decide the fate of most mortgage managers.
It is understandable that brokers are concerned about the sustainability of the non-bank sector as they have a responsibility to place their clients with a secure and stable lender.
The federal government has clearly demonstrated that it values the non-banks by including them in its $8 billion RMBS investment. Competitive funding has now been assured while the capital markets await the return of investors.
The question brokers should be asking themselves is this: should the non-bank sector disappear, what will be the broader consequences for them and for consumers?
Let’s hope we don’t have to find out.
Alex Whitlock
Publisher
