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Non-majors in the spotlight

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Annie Kane 11 minute read

As mortgage activity smashes record after record and broker market share continues to rise, the need for lenders to be able to service broker volumes quickly, efficiently and transparently is more important than ever. We take a look at how brokers have been rating the performance of the non-major banks in meeting the challenge.

If there was ever a year for a lender to ensure they were at the top of their game, it was FY21.

The last financial year saw new records being set for mortgage activity, with July 2020 marking the largest month-on-month rise on record, with new loan commitments for housing reaching record highs nearly every month thereafter.

According to Australian Bureau of Statistics figures, mortgage volumes reached a new high of $22.7 billion in October 2020, before achieving new heights nearly every month thereafter. Indeed, the most recent stats from the ABS (for May 2021) show that there was a whopping $31 billion of new loan commitments set that month.

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Given the record volumes, it is unsurprising that the broker channel also broke records last financial year. According to the latest data released by research group comparator (a CoreLogic business) and commissioned by the Mortgage & Finance Association of Australia (MFAA), in the three months to March 2021, the value of new settlements from the channel increased 27 per cent year-on-year to reach a new record for the period.

A gargantuan $62.2 billion of residential mortgages were settled by brokers in the first quarter of the calendar year, a significant increase on March 2020 figures when the value of settlements rose 37.5 per cent to $49 billion.

As well as being the largest figure recorded for the March quarter, the volume is also the second largest for any period since the MFAA first commissioned the dataset in 2013 (the previous record, $64.1 billion, was set in the quarter ending December 2020) and marked the second-highest market share for the quarter (57.5 per cent).

Given the hot market, driven by record-low interest rates and government incentives to keep the economy moving during the COVID-19 pandemic, competition among lenders for this business has been rife.

To gauge how lenders were faring, and to understand what brokers think of the performance of the lenders they are using, Momentum Intelligence surveyed brokers for its Third-Party Lending Report (see below for methodology).

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Influencing factors

Now in its 12th year of publication, the Third-Party Lending Report helps to track lender performance over time to show industry trends and changes in the competitive landscape. While the major banks generally ruled broker market share during the 2010s (with consistently above-average broker sentiment scores), in recent years the report has begun to highlight a shift towards other lenders.

Indeed, this year’s report shows that the majority of the top-performing lenders (seven out of the top 10) are non-major banks, with four of the top five rated lenders by brokers coming from this segment of the lending market.

With the increase in mortgage volumes being written, particularly over the last six months of FY21, there has been significant pressure on lender turnaround times and performance (see the June 2021 edition of The Adviser for more).

As such, brokers said that turnaround times were the leading factor when recommending a lender this year (95 per cent).

Given this, the lenders that topped the rankings this year were also among the fastest lenders to approve loans and have a consistent service.

How the non-majors fared

Topping the overall ranking this year was Macquarie Bank, taking first place from the long-term holder Bankwest (who had come top of all banks for the past four years).

Brokers gave Macquarie a score of 83 per cent, with the non-major bank ranking first for 12 of the 17 attributes across all ADIs – and receiving a whopping 91 per cent score for speed.

ING and Bankwest – two other lenders that have had consistent service this past year – were the next two highest-rated banks (with scores of 80 per cent and 79 per cent, respectively), and came third and fourth in the overall ranking of all lenders, too.

Bankwest was particularly well rated by brokers for technology, ranking top of the banks for online application status tracking, while ING was the leader of the larger non-major banks for product pricing.

Adelaide Bank (75 per cent overall rating) was among the most improved lenders this year. It shot up the rankings of the most popular banks (where more than 20 per cent of brokers had used them), rising from eighth to fourth place. This is its highest-ever ranking in this category.

Speaking to The Adviser for the In Focus podcast in April, Adelaide Bank’s head of broker distribution, Raj Kapoor, said the lender had increased its assessment team from a team of 30 people to “well over 150 in a 12-month period” to help service a surge in broker lodgements.

It had been offering remote learning and training to credit assessors to try and ensure consistency of approvals.

AMP Bank has also increased credit assessment staff, rising by a third in the past 24 months, which has helped it hold onto its strong position among the most popular banks. AMP was ranked fifth among the banks with more than 20 per cent broker usage, and highly ranked for its support of the broker channel.

Indeed, the lender is frequently cited as one of the top banks to have consistent approval times in the monthly Broker Pulse survey, having also invested in digitisation and automation over the past 24 months.

Sean O’Malley, managing director of AMP Bank, said: “Ongoing investment in our technology, processes and people will ensure AMP Bank continues to deliver fast and consistent service to our customers, brokers and advisers. We understand the importance of this, and it remains our number one focus.

“Together with offering highly competitive rates in our key target markets, we are committed to ensuring that it’s easy to do business with us.”

How the smaller non-majors fared

Of the smaller non-major banks (less than 20 per cent broker usage), 86 400 was the leader of the pack, with a score of 78 per cent, placing it fifth in the overall ranking of all lenders.

Among its competitive set, the fintech was also leading for turnaround times, online lodgements and online application status tracking.

Speaking to The Adviser last month, Melissa Christy, lending product lead at 86 400, stated: “That ‘fastest time to yes’ is one of the core parts of our proposition… We offer faster turnaround times and a fully digital experience, no supporting docs etc. And we think everyone can benefit from that, both in a broker and customer experience.”

Newcastle Permanent was close behind, ranking an impressive seventh position overall (and the highest-ranked customer-owned bank) with a score of 77 per cent.

Speaking to The Adviser, Simon Burt, Newcastle Permanent’s customer experience lead, said that the lender was “pleased” with its strong performance in the Third-Party Lending Report, particularly as it had made “a lot of adjustments and improvements” in the last 12 months to improve its home lending processes, particularly for brokers.

“Not only are we responsive, but we’ve made it easier than ever for customers to secure a loan with us through the recent introduction of a lot of new technology, including digital ID tools, digital supporting document collection and digital signatures,” he said, adding that the COVID-19 pandemic accelerated the speed in which they brought about digital tools and processes to ensure borrowers were still able to access finance while in lockdowns/under movement restrictions.

“We’ve also capitalised the opportunity to extend our broker network into Queensland, which has already proven successful,” Mr Burt continued.

“As a result, we really don’t think that borrowers can look past Newcastle Permanent’s products and approval turnarounds, and we plan on growing stronger.”

 

The Third-Party Lending Report 2021: How brokers rated the non-major banks

  1. Macquarie (83%)

  2. ING (80%)

  3. Bankwest (79%)

  4. 86 400 (78%)

  5. Newcastle Permanent (77%)

 

Ranking of banks with more than 20% broker usage

  1. Macquarie

  2. ING

  3. Bankwest

  4. Adelaide Bank

  5. AMP Bank

 

Ranking of banks with less than 20% broker usage

  1. 86 400

  2. Newcastle Permanent

  3. MyState

  4. Bank First

  5. Beyond Bank

The methodology

The 2021 Third-Party Lending Report was conducted online between 8 March and 30 April 2021. The survey encouraged mortgage brokers across Australia to participate in a self-assessed evaluation of lender performance from their experiences over the last 12 months. Participants were invited to complete this survey by email through The Adviser and Mortgage Business. Lenders were also encouraged to invite their affiliated brokers to contribute to the survey. The survey received a total of 1,380 responses. After an extensive data validation process including the removal of invalid, duplicate or incomplete responses, the useable sample size for this report was 1,017 brokers. 

 

The 17 attributes brokers were asked to rate banks on

Products

  1. Product range: Overall quality and comprehensiveness of residential mortgage products.
  2. Product pricing: Competitiveness of pricing of products across key market segments.
  3. Product policy: Comprehensiveness and clarity of product policies across key market segments.

Personnel

  1. BDMs: Overall quality of BDMs (access to BDMs, BDM proactivity and effectiveness in solving problems).
  2. Credit assessment staff: Access to and ease in dealing/communicating with credit assessment staff, including their consistency of credit decisions.
  3. Call centre support: Overall service quality, including staff technical knowledge, responsiveness and helpfulness.

Speed

  1. Turnaround times: Overall end-to-end turnaround speed, including application processing, loan approval and mortgage contract timeliness.

Support

  1. Client support: Effectiveness in servicing your clients 
post-settlement.
  2. Training and education: Provision and quality of training, whether product-specific, compliance or otherwise.
  3. Broker communication: Effectiveness of communication with brokers (verbal, written or otherwise) when dealing with queries, issues, product price/policy changes or servicing times.
  4. Channel conflict: Overall approach to the third-party channel compared with their branch network. This considers the availability of certain products, promotion of the third-party channel, preferential treatment regarding rates and LVRs.
  5. Commitment to the broker channel: Lender’s ongoing commitment and loyalty to the channel, enhancing services and support to brokers and their businesses.

Technology

  1. Online lodgements: Overall efficiencies, useability and functionality of the system.
  2. Online application status tracking: The system’s features, overall efficiency and user experience.
  3. Online resources: Comprehensiveness of resources, such as latest forms, new products and policy information.
  4. Upfront valuations: Overall functionality, user experience and effectiveness of the system, and whether it provides greater consistency and rigour in the valuation ordering process.
  5. Web presence: Effectiveness of broker web portal, considering product and servicing information available and ease of navigation.
Non-majors in the spotlight
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The not-to-be-missed Accountants Daily Strategy Day will travel through Melbourne and Sydney in August to equip accounting professionals with the latest industry updates and tips for modern practice management as well as the latest cutting-edge technology, processes, strategies and trends shaping the future of accounting. Visit the website for more information: www.accountantsdaily.com.au/strategy-day

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Annie Kane

Annie Kane

Annie Kane is the editor of The Adviser and Mortgage Business.

As well as writing about the Australian broking industry, the mortgage market, financial regulation, fintechs and the wider lending landscape – Annie is also the host of the Elite Broker and In Focus podcasts and The Adviser Live webcasts. 

Email Annie at: This email address is being protected from spambots. You need JavaScript enabled to view it.

 

 

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