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 February’s rate rise to borrowers, with CBA and NAB among banks that have increased variable rate mortgages above the RBA’s 25 basis point rise.
With borrowers still feeling the impact of two rate rises last year, the most recent hike is certain to generate considerable activity in the refinancing market.
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Profit-focused banks may find they are forced to forfeit some of the market share won from the non-bank sector in 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,” said 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].”
While product innovation will remain integral to the non-bank sector’s value proposition, it will need to be backed by service, support and flexibility if the sector is to win back market share lost to mainstream banks.
According to John Pehlivanidis, group general manager of operations at Capital Securities, with the right approach 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,” Mr Pehlivanidis said.
“Product innovation matched with flexibility and defined target markets means that it should be a good year for business [for non-bank lenders].”
Lisa Montgomery, head of marketing and consumer advocacy with non-bank lender Resi, is also bullish about the opportunities for the sector to reinvigorate itself over the next twelve months.
“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,” Ms Montgomery said.
Ms Montgomery called for non-banks to present a united front as they sought to regain market share lost to the mainstream banks, reminding them that they are in a service industry.
“We have to, as a sector, talk about why we exist if we’re going to show consumers how we add value,” she said.
