While it’s a myth that Australia’s non-bank productsare overpriced, it’s 100 per cent true that the lenders’ unique proposition is perfect forbrokers,as The Adviser discovers
With more than 90 per cent of all new home borrowing going the way of the majors, it’s probably fair to say many brokers aren’t looking too far beyond the big four.
There are a variety of reasons for this, the first one being fear.
The global financial crisis (GFC) forced many brokers to reconsider the strength of the non-bank sector.
Non-banks were considered ‘risky’ lenders, so in an attempt to do the best thing by their clients, brokers steered away from these smaller brands and instead put their business with the ‘safe’ majors.
Another reason brokers continue to avoid non-bank lenders is that they consider their proposition and portfolio of products to be too complex.
To settle a loan quickly, they opt to send their business to the majors – lenders with whom they feel more comfortable dealing. Finally, many brokers believe non-bank products are priced significantly higher than the majors’ products.
While these reasons are all easy to understand, they are not really substantiated in today’s market – in fact, Australia’s non-bank lenders are incredibly safe.
Backed by some of the nation’s leading lenders – such as National Australia Bank and ING DIRECT – the non-banks are literally as safe as houses.
Moreover, they are well priced. In fact, just one look at the home lending market shows that some of the nation’s leading interest rates are being offered by non-bank lenders.
For example, as The Adviser went to press, Advantedge was offering a one-year fixed rate of just 4.64 per cent.
In addition, the lender was offering a two-year fixed rate of 4.69 per cent, a three-year fixed rate of 4.84 per cent, a four-year fixed rate of 5.16 per cent and a five-year fixed rate of 5.22 per cent.
Australian First Mortgage’s (AFM’s) director, Tanya White, says that not only are non-banks competitive when it comes to pricing but they are also the reason why the majors offer such sharp products.
“The non-banks have to be competitive on pricing across the board,” says Ms White.
“The majors have had pressure from the non-banks to be competitive. For a long time, the big four had the monopoly and they could have priced their products however they liked.
“We forced them to be more aggressive. AFM is a mono-line business, so we need to be competitively priced; otherwise, we simply don’t have a proposition for our brokers.”
What is the proposition?
While pricing plays a very important role in what the non-banks have to offer, Ms White says there are also other elements that formulate the non-banks’ proposition.
So, what does that proposition look like today?
According to Liberty Financial’s national sales manager, John Mohnacheff, the non-bank proposition centres entirely around competition.
“We are a true alternative to the banks in every way – we are innovative and we provide genuine competition to the banks,” Mr Mohnacheff says.
“I believe the majors do not have the customer in mind when they make their decisions around policy, product and pricing. The banks will do whatever they can to be pro table and powerful.
“Non-banks are innovative and believe strongly in customer service. We genuinely care about our clients – be that the broker or the borrower.
“We have never changed our mantra. We have been there for our borrowers and brokers from day dot,” he says.
Mr Mohnacheff says that if it was not for the non-banks, the Australian lending market would have no innovation, no competitive pricing and brokers would not own and operate successful diversified businesses.
“This industry is all about creating choice,” he says, “and if [brokers] are serious about delivering that to their clients, then they must embrace non-bank lenders.
“Non-banks have chosen the broking channel as their primary source of distribution and we have never deviated from that. The non-bank sector is deserving of the support of brokers.
“As a non-bank, our proposition – and indeed, our core objective – is to deliver competition, choice and innovation to our clients.
“Who introduced custom lending, such as non-conforming loans, to Australia? It was the non-banks. Who brought product diversification to the broking sector? Who introduced asset lending? It wasn’t the majors. They have always had these distinct lending channels, but they have kept them to themselves.
“Every single innovative step that has been taken in this industry has happened because of the non-banks.
“Brokers need to wake up to the fact that innovation is not going to come from the majors. They are stoic, they are conservative and they are stuck in the mud. They do not challenge the status quo and think outside of the box.
“The non-bank proposition is the best in the market and the sooner brokers understand and embrace this, the better we will be as an industry.”
Advantedge’s general manager, distribution, Brett Halliwell agrees and adds that there are many advantages to using a non-bank lender.
“The first advantage has to be around flexibility. Because they are smaller, they can meet customers’ needs differently and offer a more personalised service,” he says.
“Their service is really second to none. Non-bank lenders are attentive and it is easy for brokers to find the right person within the organisation to help them with their queries and concerns.”
Mr Halliwell encourages brokers to look at the non-bank lenders on their panel when searching for the right solution for their clients.
While the non-bank proposition remains largely the same as when the sector was first established, these lenders have evolved, not only to be incredibly innovative in terms of product, but also competitively priced.
Non-banks are no longer the victim of funding pressures. Today, they can compete with the majors on pricing. Better yet, they offer niche products and a specialised service that can assist any client a broker may have.
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