Mortgage managers are starting to feel the squeeze. Property markets are tightening and margins are shrinking. To top it off, mainstream lenders are also scrambling to undercut each other in order to attract borrowers.
If these conditions aren’t enough to keep most non-bank lenders on their toes, the timing of HLP’s collapse could not have been worse. Unfortunately, it appears that little was done to properly manage the situation and there’s no doubt that the lack of proper damage control has left some brokers questioning the security of working closely with the non-bank sector.
Against this background, the pressure is now mounting on mortgage managers to take decisive action to reverse the negative perceptions of the non-bank sector held not only by brokers but consumers.
A need for cohesion
Not only has the collapse of HLP shown up the lack of understanding by the wider broker community of the role of non-bank lenders, it has also highlighted the growing need for a clear and unified approach to spreading the message about who non-bank lenders are, and what they do.
Michael Maiorano, associate director of Australian First Mortgage, says that although competition between mortgage managers remains healthy, there is still scope for the forging of non-competitive alliances to not only help non-bank lenders compete against the big banks, but also help mortgage managers redefine their place in the industry.
“Continued consolidation has blurred the traditional roles and processes of the lending industry, making it critical for mortgage managers to support each other," says Maiorano.
“Competition within the industry has become increasingly aggressive, almost to the point where the non-bank sector runs the risk of cannibalising itself. Although the market space is certainly tighter, a more cohesive approach would help to strengthen the industry’s offering.”
Satisfying the needs of brokers and meeting the challenge of tackling the banks head on will come down to a number of factors. Key will be the ability of mortgage managers to provide innovative market solutions and communicate these options effectively through marketing, advertising and PR – on both an individual and collective basis.
Says Maiorano: “Mortgage managers need to continually look at their product offering and the needs of their brokers. By working with lenders to develop new products, mortgage managers will be able to secure their place in the industry as innovators and not just sellers."
Mortgage Finance Association of Australia (MFAA) CEO Phil Naylor agrees that the onus should largely be placed on mortgage managers to refine their competitive offerings. However, he also believes that there should be a greater emphasis on educating consumers about mortgage managers.
“Due to the various ways mortgage managers interact with consumers, there is often confusion over their actual role in the loan process," says Naylor. "The MFAA is helping to address this issue by explaining the role of mortgage managers as one of the features in an upcoming ad campaign encouraging consumers to deal with MFAA members."
While this is good news for those mortgage managers battling against any negative perception of the non-bank sector, raising their profile among consumers is not expected to be an easy task. However, many positive steps have already been taken.
Non-bank lenders such as Aussie, RAMS Home Loans and Wizard Home Loans have built up a strong brand awareness, which has benefits for the industry as a whole as much as for their own businesses. Even mortgage managers with modest budgets should be able to leverage off the growing awareness of the non-bank sector among Australian borrowers through the marketing activities of leading non-bank lenders such as these.
Despite the challenges that lie ahead, the mood of many mortgage managers remains positive. Michael Maiorano, in particular, predicts that mortgage managers can look forward to a steady rise in business over the next five years as currently low-profile heavyweight non-bank lenders start to become more visible.
“Mortgage managers can expect huge changes in the industry, especially when some of the newer non-bank lenders really start to target the market,” he says.
“Lenders like GMAC and GE Money are like sleeping giants at the moment. When they move, they’ll have a huge impact on the role mortgage managers play in the industry.”