The non-bank lending sector experienced a significant drop in new business in September.
ABS figures released last month reveal that the number of owner-occupied dwellings financed by the non-bank sector fell by 10.1% in September compared to August.
Adrian Winskill, Valuations Exchange national manager, group sales, backs up these statistics. “We’ve certainly seen a drop in the number of valuations booked by non-bank mortgage providers since August,” he said, adding, “while I’d say there’s even been a small increase in valuations from the banks – a trend that is continuing as we move through December.”
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Wizard Home Loans founder and chairman Mark Bouris told Mortgage Business the September figures – the lowest since 2001 – highlighted the market’s state of flux.
“The ABS figures are further evidence that the market is quite volatile at the moment and all lenders are fighting for market share,” Bouris said.
According to Bouris Wizard’s market share grew in the first half of the year but had fallen slightly over the last quarter. But he is confident Wizard has what it takes to compete against the banks.
“Every lender is exposed to the increase in the cost of funds regardless of whether they are a bank or non-bank,” Bouris said.
“Wizard remains committed to maintaining competitive pricing and our standard variable rate remains around 35 basis points lower than the big four banks’ advertised comparable rates.”
According to Australian First Mortgage national director Iain Forbes, the next six months will be difficult.
AFM reported strong growth over the 2007 financial year, with equity returns of 40 per cent, as well as commission revenue growth of 17 per cent compared to 2006. But Forbes is braced for a slowdown in the short-term. “It’s fair to say, looking at our figures, we are preparing for tougher times ahead. There will be a decline in business, though things will settle down,” Forbes said.
Forbes said he believed competitive pricing by the banks had taken its toll, eroding the non-banks’ traditional pricing advantage.
“There’s no longer a big price differentiation between the banks’ and the non-banks’ products. Sometimes, the banks’ low doc products offer even lower interest rates than us.”
While the ABS figures may seem bleak, MFAA CEO Phil Naylor sees it as a temporary setback.
“At the moment the non-banks have been forced to reduce their competitive advantage because of the liquidity crunch, which is being felt by the banks too,” said Naylor.
According to Naylor while to date the banks may have been able to absorb costs, in the longer term they will pass those costs on to consumers – leveling the playing field once again.
“The competitive advantage is a temporary loss for the non-banks. The non-bank sector has always prided itself on innovation and competitiveness and this will not change,” said Naylor.
“The non-bank sector is a dynamic industry, and like any other business sector, those who can adapt will weather the storm.”
