New research commissioned by the Australian Mortgage Council has shown that 31 per cent of consumers would feel ‘uncomfortable’ to ‘very uncomfortable’ obtaining a loan through a non-bank lender.
Alan Shields, research director at Retail Finance Intelligence (RFI), the company that undertook the research, cited general market unrest and the damning media coverage of RAMS Home Loans as key contributors to the negative consumer perception of the industry.
The survey, which was conducted for the first time this year, polled 2,000 respondents on a broad range of financial topics to unearth consumers’ hopes, fears and attitudes towards finance, lenders and debt.
Of the 31 per cent uncomfortable with obtaining a loan through a non-bank lender, 70 per cent justified this perception by claiming they feared they would lose their homes if a non-bank lender went bust.
“This was a surprising result,” said Shields, who believes that the perception showed obvious gaps in consumer awareness.
“The [non-bank] lending industry is very complex and clearly there is a lot of consumer ignorance surrounding it,” he said.
While the survey results don’t bode well for the non-bank sector, it is hard to assess their significance given that there are no previous findings to measure them against.
There is little doubt however that activity has slowed for many non-bank lenders.
ABS figures indicate the number of owner occupied dwellings financed by the non-bank sector decreased by 10.1% in September 2007 compared with August 2007.
Murray Cowan, managing director of Better Mortgage Management, concedes that his business has recently seen a reduction in applications; though he believes the federal election has caused some disruption.
In response to the slowdown and concerns over borrower confidence in the non-bank sector, Cowan has looked closely at how Better Mortgage Management can position itself in what is a changing mortgage market.
“We’ve started thinking about strategies,” said Cowan, who highlights the importance of maintaining communication and open dialogue with existing customers during this tough period.
“We’ve added extra staff to help with customer service – taking proactive steps to help educate our customer base,” he said.
Cowan remains positive about the non-banks’ long-term ability to compete despite the current funding climate.
“The banks are slowly catching up with interest rates. With a more level playing field the non-bank sector will be able to regain traction in the market place.”