The past 12 months have seen further innovation and consolidation from a majority of lenders, but which ones shined the brightest in 2013?
2013 has been an interesting year. The property market turned around in some states, with growth in number of regions; the cash rate hit a historic low; and buyers, led by investors flocked to brokers for expert credit advice.
Unlike the year before, the banks generally passed on rate cuts in full and, in some rare cases, cut more than the RBA, an indication of how competitive lenders have become in the past year.
Broker market share picked up, and with industrystakeholders tipping it to reach 50 per cent in the coming 12 months, lenders have spent much of 2013 trying to appeal to the third party channel.
“The broker channel is integral to NAB’s overall strategy and we have a very important role to play in shaping the industry,” says general manager for broker distribution at NAB, Steve Kane.
“Today, NAB is growing the fastest among our peers in the third-party distribution channel and we remain committed to investing in and working with our broker partners to continue growing together.”
The major players
Each year, The Adviser surveys the broking community to track how well Australia’s lenders are performing. This comprehensive, industry-leading ranking has provided lenders with a yardstick each year – and goals to work toward to improve their service propositions.
In 2013, for the first time, all of the majors managed to improve their overall broker satisfaction rating or retain their previously strong levels, suggesting all four of the banks are – for the moment – hitting the sweet spot.
NAB dominated in 2012, beating its nearest rival, ANZ, by 2.66 points. In 2013, however, the story was very different, with less than one point separating the top three.
With NAB’s dominance fading, the 2014 ranking could be anybody’s game.
“We believe our continued success comes down to listening to brokers and responding to their needs,” Mr Kane tells The Adviser.
“In the last year, we’ve worked hard to improve all aspects of our business, including broker-oriented services, use of technology and the end-customer experience, and we will continue to do so.
“We continue to lead the market in a number of areas, including our ramped trail commission structure and price for risk. We have also continued to invest in the capabilities of our BDM team to o er support to brokers around the clock in a way that suits any business – in person, over the phone or online.”
But competing on price is only one lender strategy, and while NAB and CBA jostled for market dominance by establishing sharp rates, Westpac decided on a different tack.
With a vast majority of Westpac mortgage holders classed as ‘affluent’, the decision to offer a higher rate than the rest of the majors significantly impacted its placement in last year’s ranking.
But coming last in the ranking certainly doesn’t indicate Westpac fails to see the value of the broker channel, according to general manager of mortgage broking distribution Tony MacRae.
“Brokers are an important business partner at a local level, with around 45 per cent of the bank’s mortgages delivered via the mortgage broker channel,” he says.
And with that figure trending upwards, the importance of the broker channel has never been greater.
Nevertheless, brokers overwhelmingly believe the major lenders have room to move. According to research conducted by The Adviser, the third party channel might be more inclined to do business with certain lenders if they were to offer basic home loan products with no hidden fees or charges, greater flexibility and fewer conditions.
Providing both choice and competition in the marketplace, non-major and non-bank lenders play a crucial role, although they still account for a very small proportion of home loans overall.
According to AFG’s monthly mortgage index, however, non-major lenders performed exceptionally well in 2013.
Just over 25 per cent of all mortgages were held by non-majors in October 2013, up from 22.9 per cent in October 2012. Non-majors were also popular with re financers, with 30.4 per cent of all re nancing loans going to this sector of the lending market.
“2013 was another successful year for the non-majors,” head of third party at ING Direct Mark Woolnough says.
“We continued to consolidate the broker partner program and to make sure the work we invested in 2012 and before continued to meet the brokers’ expectations. Hopefully this has given brokers the trust and confidence to move their customers into ING Direct.”
The Adviser’s 2013 non-major bank ranking found brokers are happier than ever with the products and service they receive from the sector, suggesting these players will be around for a long time.
ING Direct’s growth was further reinforced by the lender’s topping the survey for the second year in a row.
“Often you’ll find that a lender will have a really successful year and can sometimes fall off the radar the next year because they set the benchmark for the competition, so what was pleasing for us was coming out on top again for the second year running,” Mr Wollnough says.
“Heading into 2014, we will further that and hopefully top the ranking once again – well that’s the plan anyway.”
The smallest of margins separated the non-majors in the 2013 ranking although Macquarie’s placement was a notable feat in itself. After leaving the broker channel during the GFC and then re-entering in mid-2010, the lender placed last. In 2012, Macquarie had improved and came fifth and then in 2013, the bank came second.
According to James Casey, head of mortgages product at Macquarie, the jump from seventh place to second cannot be attributed to just one point of focus.
“There's not just one single thing,” Mr Casey said. “It’s just a lot of hard work in a lot of areas in the business, whether it’s getting more coverage or more BDMs to get out on the road to help our clients.”
The non-majors excelled in several areas, but the report also highlighted those in which they could perform better.
When compared with the major banks, it is clear Australia’s non-majors outshine their larger counterparts in many business categories – most notably for BDMs, credit assessors and business support.
While these positives may be attributed to their being smaller institutions with greater ‘nimbleness’, the survey also indicates the areas in which larger, more powerful institutions can dominate.
What brokers want
In any business, getting feedback from clients is essential so the business can know how its product or service is being received – and therefore how they can improve.
Lenders are no exception, and they are always seeking feedback from their clients – the brokers.
So what do the lenders believe brokers want in 2013?
Citi, for one, feels that minimising re-works is what they need.
“One of our key objectives we took from last year was to assist our brokers to improve the quality of their deals and change the way we communicate through our credit acceptance process to minimise re-works and improve turnaround times,” says Aaron Milburn, head of broker distribution at Citi.
“So, while we will maintain consistencies in this, we will also pick other areas for improvement, which will be determined in conjunction with broker feedback.”
Bankwest brokers, meanwhile, wanted speedier transactions. “The one area brokers asked us to work on is our speed to approval,” says head of specialist banking, Ian Rakhit. “We’ve made great strides this year in reducing the average time to unconditional approval.”
NAB has invested heavily in what is considered by the bank (and brokers, according to the rankings) as the best BDM team on the market.
“We’ve continued to invest in the capability of our BDM teams to provide an even be er experience to our broker partners ... taking their feedback on board,” says the lender’s Steve Kane.
“We have the largest BDM team in the market, and earlier this year we tailored our BDM team structures based on broker feedback, giving our brokers a team of specialists to provide support to brokers from every stage of the loan settlement process.”
Mr Kane adds that the recent introduction of the Broker Response Centre has improved the lender’s relationship with brokers.
“We have also aligned our processing business with our NAB Broker BDMs and enhanced communication with our broker network at the credit approval and settlement stages,” he says.
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