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Balance sheet funds drive non-bank "renaissance"

by Staff Reporter11 minute read
The Adviser

Despite an overall decline in the non-bank sector’s market share over the last 18 months, the originator and mortgage manager sectors may account for a larger share of the market than figures suggest.

According to ABS data the non-bank’s share of the residential mortgage market has fallen to just under 8 per cent as of February, compared to 13 per cent 12 months ago and more than 20 per cent in 2007.

But the figures could be considered slightly misleading when looking at the broader ‘non-bank’ sector.

ING DIRECT, Adelaide and Bendigo Bank and Origin also provide funding to originators from their balance sheets – volumes that appear in ABS statistics as ‘bank’ rather than ‘non-bank’ volumes.


Brett Mansfield, ING DIRECT's head of mortgage management, told Mortgage Business a significant proportion of ING DIRECT’s volumes were generated via originators and mortgage managers.

“Our mortgage manager channel accounts for 22 per cent of our overall residential mortgage portfolio,” he said.

Brett Hartley of MAS Wholesale, a boutique funder that aggregates balance sheet funds to originators, said he had observed a heightened demand for balance sheet funding in recent times.

“We’ve definitely seen a sharp rise in demand for balance sheet funding – particularly in the last 12 months,” he says, pointing to the more challenging funding environment as the driver.

“A couple of years ago the cost of securitised funds was so low which meant that there was less demand for balance sheet acquired funding. That has all changed,” he says.

Mr Hartley said the changing market has seen demand for balance sheet funding come full circle, and what was once old is “new again”.

“When MAS commenced trading in 2003, our balance sheet acquired funding model had very strong volume and demand. Securitised funders ate into our target market through 2006/2007 although pleasingly, we are now experiencing a real renaissance.”


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