Volatile market conditions and a rising rate environment could pave the way for a resurgent non-bank sector.
Major banks have moved quickly to pass on last Tuesday's rate rise to borrowers, with a number, including CBA and NAB, increasing variable rate mortgages above the RBA’s 25 basis point rise.
With borrowers still digesting two rate rises from last year, the most recent hike is sure to prompt considerable activity in the refinancing market.
Profit-focused banks may now forfeit some of the market share won from the non-bank sector over the latter part of 2007 as borrowers seek greater flexibility and service.
“We all must remember [that] property buyers are becoming more and more savvy, and the market leaders will be the lenders who communicate best with their customers,” says Geoff Wilson, managing director of Wilson National.
"Communication, education and plain honesty is the key to ensuring sustainable business through this challenging period [of rate rises],” he says.
While product innovation will remain integral to the non-bank’s proposition, it will need to be backed by service, support and flexibility to win back market share lost to mainstream banks.
According to John Pehlivanidis, group general manager of operations at Capital Securities, the non-bank sector could secure around 25 per cent of market share by the end of 2008.
“We [non-bank lenders] need to be very service orientated this year. Sentiment has already started to shift away from the big banks and back towards the non-bank sector,” he says.
“Product innovation matched with flexibility and having defined target markets mean that it should be a good year for business [for non-bank lenders].”
The next twelve months offer an opportunity to breathe new life into the sector, according to Lisa Montgomery, head of marketing and consumer advocacy with non-bank lender Resi.
“Service will be the key to riding [this phase] through. Anyone who isn’t focused on retaining and attracting [customers] through service will be in a lot of trouble,” she says.
Ms Montgomery calls for unity from the non-banks as they seek to regain market share lost to the mainstream banks, reminding them of their role as service providers.
“We have to, as a sector, talk about why we exist if we’re going to show consumers how we add value,” she says.