What will the lending market look like in 2024? We ask the non-major banks

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A WORD FROM MSA NATIONAL

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That’s why lenders that partner with MSA have happier customers and happier brokers.

The mortgage market’s transformation journey in 2024 starts here … with MSA National.

Lender appetites becoming more precise

In 2024, banks like AMP will have a very purposeful approach to the segment of the market that they want to target. With efficiencies and digitisation, you start to realise where your markets are and, more importantly, where your markets aren’t. I wouldn’t be surprised if we see more banks being far more precise in the types of customers they can best support. It won’t be volume for the sake of volume anymore; it will be volume with the right margin and with the right borrower segment. [That way] they have a great experience not just in getting and settling a loan, but also in the experience that brokers and their customers have for the years afterwards.

I think brokers who are partnering with non-major banks are finding that they’re getting that real richness of support, detail, and information and they’re able to then share that with customers.

Paul Herbert, Head of intermediary distribution and finance, AMP Bank

A continued move to digital efficiencies

Bankwest’s strategy today is to grow as a digital and broker-first bank for home buyers, who are increasingly preferring digital – often self-serve – solutions and it’s important we focus investment in those areas to deliver the best possible experience for customers.

To put it into context, more than 80 per cent of Bankwest’s home loan customers originate through our critical broker network and digital transactions now account for about 97 per cent of all transactions, while in-branch over-the-counter transactions have declined by 44 per cent in the past three years.

Those trends, our strategic direction, and our focus on prioritising investment in our digital and broker channels mean we expect to operate fewer branches in the future.

This evolution will ensure Bankwest remains a sustainable, growing, and successful Western Australian business and employer in a highly competitive national banking sector.

Ian Rakhit, general manager, third party, Bankwest

No relief in mortgage rates

I think system growth will remain moderate and we won’t see much, if any relief, in mortgage interest rates – not until the market is sure that the RBA has no further rate increases planned and inflation is controlled.

I would expect faster times to decision, with lower volumes and continued investment across the industry, improving broker outcomes.

One way to keep competition relevant is to make sure everyone’s on a level playing field. It was pretty evident that it wasn’t a level playing field for a while there from a serviceability perspective; there seemed to be different rules for different players. Some of the larger players in the market seemed to be allowed to play by different rules, with the ability to apply different buffers in the market. So it’d be nice to have a level playing field across the board to help with the competitive nature of what non-majors do.

Darren Kasehagen, general manager, third-party banking, Bendigo and Adelaide Bank

AI in lending decisions

I think purchases will continue to pick back up again in 2024 and artificial intelligence (AI) will come into lending in 2024. It is starting to surface through some broker touchpoints already and we’re having some interesting conversations with Microsoft about deploying AI through our broker portals. This could be through simple things like natural language AI, which could simply answer questions straight into the platform in real time. That would take away pain from a broker and from our BDMs, removing the need to send emails or make phone calls.

One of the most important pieces in keeping competitive is staying competitive in technology. So the non-majors are not just building tech for what’s happening now, but what’s going to be happening in three years’ time. It’s going to be very important for the non-majors to ensure we create a long-lasting home for our customers. So I think keeping them happy with rates and affordability is also going to be key going forward.

Johnny Lockwood, General manager broker, credit cards & loyalty, BOQ

Non-stop investment in broker channel

Lenders have been focusing on the volume that they really want. I think that will continue in 2024.

From a non-major bank perspective, you’ll see non-stop investment in the broker channel. Look at the digital offering and self-serve options for brokers, broker portals etc, which have been rolled out in the last few years. The technology has just jumped ahead very quickly. While the majors have always been good at this, the non-majors are catching up very, very quickly. I don’t see that stopping in 2024.

I think we are very conscious of having trust and love from our customers and not losing that. Brokers are so important in this, so we’ve just non-stop invested in technology for our broker channel.

Glenn Gibson, (Former) head of sales & distribution, ING Australia

A sustainability focus from borrowers

Customers are wanting to have a little bit more knowledge around what a bank’s environmental stance is on sustainability. I’ve never fielded so many calls as we have in the last six months on what our stance is and I think that’s increasingly important for borrowers.

It’s all about the service proposition and how much value we can bring to our brokers – who are our advocates and help tell the story about us to their clients.

The non-majors are key partners of the broker channel and are constantly investing to support them. Technology plays a role there. While we know the human touch is crucial to the offering, we’d like to complement that with much better technology and processes.

James Cameron, Head of distribution, MyState Bank

Continued strength in home buying

Spring is the number one time of the year for purchases, but I feel like purchases will continue to be strong in 2024. Towards the end of an interest rate rising cycle, we typically see a consumer confidence uplift.

We’re already starting to see more investors come back into the market, too. So I definitely think those will be a key part of the calendar year 2024

I see the next 12 months being very bright, not only for brokers, but for non-major banks, [which] are well-positioned to take more market share. The feedback from the broker market is they want non-majors to be able to provide genuine choice to the end customer.

I think that’s because of our aligned position; we’re almost entirely reliant on the success of the broker market and invest heavily in this channel.

Troy Fedder, Acting executive general manager of home lending, Suncorp

A greater role for technology in mortgages

Technology will continue to play a big role in mortgages and the customer experience, whether it is budgeting tools, real-time savings and spending insights, or bill predictors. It’s not just about the origination process, it’s also about giving customers technology in the palm of their hands that gives them a holistic view of their finances, so they can build momentum with their money.

I think we’ll also see more competition from the non-majors in terms of bringing innovation through the broker origination process, the fastest time to yes, and through everyday banking.

I think something non-major lenders can really show to the broker channel is how much we’re investing heavily in our resources to reduce time to unconditional approval. It’s not just based on price. That will mean brokers can continue to work with us.

George Srbinovski, Head of broker distribution, ubank

More budgeting and fierce competition for new lending

One of the trends we’re seeing now is that budgeting is back in vogue. Our recent survey found that 47 per cent of Australians have created a household budget for the first time and close to half a million of our customers are using our budgeting tools or using the Westpac App to track their spending and see how it’s categorised. We haven’t seen that before, so that’s interesting and shows that people are watching the cost of living and are eager to see where they can make some savings.

I think there will continue to be fierce competition for new lending going forward. I think that’s a great outcome for the broker and their customer, as everyone is investing in that.

I think that we’ll see lenders raise the bar that much higher as competition continues to heat up and non-major banks will therefore see a larger share of the pie in new lending.

Suzanne Wood General manager, residential broker, Victoria/Tasmania, Westpac Group (representing St.George)

Written by Annie Kane

Last Updated: 22 December 2023

Published: 02 January 2024