Ian August 3, 2009

Do they reaslise that there is no such thing as the big four anymore and in fact Westpac owns RAMS and therefore if you deal with RAMS you are effectively supporting the big two (Being Westpac/StGeorge/RAMS group & CBA/Bankwest group).

broker in the burbs August 3, 2009

Of course there is no need to over emphasise who owns & funds RAMS is there?

I use RAMS for reasons of solid pricing, flexible credit policies, simplicity and a broker friendly business model. IMO, they are a sound option in a very limited field.

But I never forget, I still might be dealing with a ‘wolf in sheeps clothing’!

You can't be serious August 3, 2009

Rams is owned and run by Westpac. So you can’t be serious and say they are an alternative lending solution

Roger August 3, 2009

Turn around tmes a joke with Rams

Xerxes August 3, 2009

Very informative article.

CBA/Bankwest with combined 42% # 1 broker recommendation.

Westpac/St G/RAMS with combined 34% # 1 broker recommendation.

The Big 2 get 76% of highest broker recommendations. Very telling stats.

I am most horrified that 35% of brokers rank CBA as their first recommendation. Don’t these brokers think?

Listen to Kathy Cummings words. Observe CBA’s actions towards brokers. This corporate monster is hostile towards brokers. 35% of us!!!!!!

Please people, start thinking.

Xerxes August 3, 2009

I think I read that wrong.

CBA/Bankwest combined have 35%, with 7% coming from Bankwest. That still leaves 28% recommending CBA as their first choice loan option to customers. Still horrific.

And the 2 majors having 69% of brokers # 1 recommendations.

Xerxes August 3, 2009

looking at the article a 3rd time. The statistics are slightly ambiguous. Is St George’s 9% inclusive of Westpac’s 22% or exclusive??

A simple listing of broker 1st recommendation % for all lenders might have been more useful.

broker in the burbs August 3, 2009

Xerxes, anyway you look at it mate….they’re strangling competition, so you’re sentiments are on the money.

As it happens, the former competition cop, Alan Fels has commented on how the current situation regarding the majors is sending the banking sector backwards.

“If financial markets return to normality, it will be years, if not decades, before the harm to competition is undone.” says the prof.

Another key measure to kill off competition is the wholesale funding guarantee, which has given the majors (AA rated) a historically higher margin advantage over the 2nd tier banks (BBB rated) to the tune of 80bps.

There was always a margin, pre guarantee, but not this significant. And the 2nd tier business model efficiencies have subsequently been wiped out because of it.

Result, precious little competition.

Look out consumers, the CBA & Westpac are now squeezing every aspect of the industry whilst this window of non competition opportunity exists.

Legislators need to act because the regulators have failed us yet again.

MGR August 3, 2009

So, it looks like we’ll be stuck with the big 2 banks (Coles and Woolies?)
Bravo, regulators. You idiots have done it, yet again!

bizbroker August 4, 2009

A bit confused, to be honest. Obviously I haven’t been keeping up with Lending Central or the news, and didn’t notice that regulators joined the broker industry in droves recently and now write 85% of their loans to CBA and Westpac. I must have also missed the news break where the nice newsreader explained that major banks are strangling competition Sorry, its these old bones you see.. I thought it was because aggregators, MFAA and now regulators (or anyone else except brokers) were giving them all the business? Silly me. Sorry, just a bit of a moment. Bear with me. Actually, thinking about it now, just last week I saw hundreds of those pesky regulators getting accredited with CBA and Westpac. The cheek of them! Sitting there beside all those aggregator guys and gals, and those crazy MFAA people. I mean, how dare they? They were even getting accredited with St George, NAB and ANZ, just so they could get their market share up to about 95%. It was amazing, bold and brave beyond description. Their appetite for loan writing is insatiable! It has been a revelation. They sure wont have any trouble maintaining those troublesome accreditations with those sorts of volumes though, no sir. Stronger than ever they’ll be, so we better watch out. Mark my words- beware the regulators, aggregators and MFAA. I don’t know how we poor brokers, with access to so many other great lenders products, will ever survive? In the face of such odds, do you think better rates and service, fewer fees and better commissions will help? If not, looks like a long, tough road ahead until we get rid of those darn regulators, aggregators and MFAA guys. Maybe then some brokers can write some loans and they wont all be going to the major banks. That is, if you believe in miracles!!!!!!

Grantx August 4, 2009

Do RAMS do 90% LVR? I agreed with my broker a year ago 95% for my investment property, now the big four bank has changed the rules and wants more money as the unit is built. Is this fair?

Broker in the 'burbs August 4, 2009

bizbroker,

So what your getting at is; that there are other product providers…is that right?

Yep, I’m with you there. There’s a couple of non bank players trying their guts out, I suppose. And I too support them as well. I practically vomit when I have to place a deal to a major.

But when I mentioned the failure of regulators re: competition, I was referring to the very real market environment that;

1. Offers AAA rated ADI’s an 80bp wholesale funding advantage through the government guarantee that essentially has killed off Australian 2nd tier bank competition.

2. Where APRA decides to give the green light to have the CBA gobble up Bankwest, because they were worried about HBOS’s financial status…who cares….an Australian bank (Bankwest) has prudential standards to stand on it’s own two feet.

3. Where US regulators allow a system to flourish that creates a worldwide recession and credit crisis that impacts everything. In Australia we see the loss of numerous non bank players that basically ensures that the majors have an oligopoly.

4. Where, the CBA & Westpac own the vast bulk of product manufacture and distribution (2nd tiers, aggregators and now non banks), it cannot be good for competition.

You’re right mate….you might be a bit confused.

Gawd, I am.

bizbroker August 4, 2009

So whats the solution ‘burbs? In a market where there are viable competitive options but brokers ignore them, where does that leave us? At the complete mercy of a small handful of major banks or tier 2 lenders owned by major banks? This cannot be anything but bad news for brokers and borrowers alike. I’ve always argued that all we need to be doing to restore some balance and competition is try and direct about 20% of our business to non banks. We have very rapidly reached a point where the majors have an almost strangehold on market share. 6 months or a year from now that position will only be further cemented, and aside from the threat to our own businesses, what does that mean for customers rates? The irony is, brokers and customers concerns with using non banks, centres around their ability to retain competitive pricing, but it seems to me we all have it back to front. Its the major banks who will be empowered to do as they wish with rates. Let’s not even talk about what they will feel empowered to do with brokers commissions, accreditations and so on….

Xerxes August 4, 2009

Hi Briz,

What specific lenders and products can you recommend?

Broker in the 'burbs August 4, 2009

Biz,

Not sure mate…..it’s a toughie (solutions that is). But I suspect it really comes back to a couple of things.

Firstly, the securitisation market gets back into full swing with capital market costs mirroring ADI funding costs and secondly, post licencing, brokers evolving with new business models that leave old aggregator, trade group and defacto bank sales agent value propositions as a thing of the past.

Broking has to evolve into an independant, self supporting and sustainable business model, going forward. It cannot be tied into a few bank’s distribution strategies, which is the game being attempted by a couple of banks now.

But in time, these issues will flesh themselves out and smarter people than me will develop new business models to recapture market share.

In my opinion, if one owns the product and no one else can develop it (like the oil companies) we’re at their mercy. The majors have that advantage right now. Others can develop product at the minute, but not at the same price, hence the majors huge market share.

But when pricing gets back to some equalibrium and with pricing parity, then that’s when new players can develop product and brokers value proposition becomes significantly more valuable, then bingo.

In my ever so humble opinion, of course.
Cheers

bizbroker August 4, 2009

Xerxes, with all due respect, how can any broker with access to PD days, email or internet not know this for themselves? Its freely available information. I have read many of your posts and you don’t seem a dopey kind of individual to me whatsoever, so I’m a little shocked by your question, to be honest. In any event, try some of these lenders and products for starters,as an alternative to the same old major bank loans;

AMO Rate Saver 4.78%
MORTGAGE HOUSE Pure Basic 4.85%
EASY STREET Basic Variable 5.09%
REDUCE Home Loans 4.79%
HOMESTAR 5.03%
FIRSTMAC FightBack 5.09%

Most these loans are fee free. Depending on whether you want no frills, or all the bells and whistles, you have many choices. AMO or Mtg House for example are very basic products, whereas Firstmac fightback is a 100% offset with all the goodies. No fees on any of them. Whichever way you look at it, they are all cheaper than major bank pro packs and most their basic variables. 2 minutes on Cannex or Infoice or Yourmortgage.com.au can show you dozens of products cheaper than the major banks. Surely we don’t really need to be spoon fed? If these guys arent on aggregator panels, so what? Call them and go direct, or use the non bank lenders that are. Homeloans ltd and Firstmac and Mortgage Ezy are on most panels.

bizbroker August 4, 2009

‘burbs, I hear what you are saying and sure, a tough securitisation market means funding cost challenges remains problematic for everyone, but the Australian Office of Financial Management has provided Australia’s big 3 non bank funders ( Challenger, Resimac and Firstmac ) with enough liquidity to offer some pretty great product and pricing.

Take a look at some of the products I have noted in my previous post to Xerxes, above. The only advantage banks really enjoy is having slightly less restrictive policies because they enjoy the ability to decide on deals without requiring LMI approval, but that should only advantage them in a relatively small percentage of cases. They certainly cannot claim to have pricing advantage.

Ultimately, we can no longer make excuses that there are not better or competitively priced deals around, with which to compete with the majors. Quite simply, there are many available, and this has been the case for all of 2009 ad the later part of 2008. Yet here we find ourselves in July, with the big four holding 92% market share for the year, and Westpac and CBA holding 85% alone, in just the last 3 months! What it must come down to is this; an acknowledgement that brokers are handing the market to the majors on a platter. Fellow brokers fill these pages with claims of finding their customers the best deals but when the products and lenders they overwhelming support offer none of the best dozen or so deals in the market, you have to wonder whether your second theme isn’t the more accurate one; that brokers have become defacto bank sales agents/distributors/order takers.

The data showing that Westpac and CBA received 85% of all business for the last quarter is the saddest news this industry has ever seen. It is sad but undeniable evidence that most brokers aren’t even trying to support anyone else.

Broker in the 'burbs August 4, 2009

biz,

No argument from me. I use Resimac myself via Novasure as my lead prime & specialist lender. I can price it up (or down. My business model has always been directed towards non bank lenders for a host of reasons.

If however, this option is an inappropriate one, then I consider other lending options based on credit policy, pricing and other filters. This can result in bank or non bank options.

I also have direct accreditations with a number of non bank lenders for niche clients or scenarios.

But I wonder how the local Aussie HL guy or the Mortgage Choice broker deals with the market. Like production targets imposed by their broker groups.

I would think that seeking solutions that offers the least client resistance is the most likely course of action, as well as the overarching culture of these groups too. Brand comfort, no DEF’s, competitive market pricing and as you say no LMI considerations; more often than not results in the ‘no think’, mortgage software option.

Sad but true.

But the more these brokers work only the majors, then all the better for me. Gives me a very different value proposition to offer and that suits me just fine.

Here’s a thought biz.

I reckon that if Ralph & Gail continue with their volume quotas, I can see brokers actually promoting themselves as ‘accredited’ CBA or Westpac brokers. Bit like sales agents. I mean if some brokers lose their accreditations, then others will spruik their exhaulted position as a ‘bank’ preferred broker.

I also wonder what an ‘ex’ accredited broker will do, when an existing client requests an increase to an existing CBA or Westpac loan and where refinance is not a valid strategy.

Sorry Mr client, can’t do anymore…..not accredited.

So, the client walks to the ‘accredited’ CBA or Westpac broker or does he/she wander off to the bank themselves!!

Loss of client. Loss of trail.

So, now a number of brokers may feel press ganged into doing as their told as their existing books are probably 60& loaded with CBA & Westpac customers anyway.

How sad.

Cheers biz.

bizbroker August 4, 2009

I can see that too ‘burbs. In fact, I can see that unless you write consistently good volumes as an individual, per month, its going to be awfully difficult to retain accreditations with CBA, St George, ING, etc etc… pretty soon the only way to do so will be to become a multiple person band, to share the load. One man bands may not be able to survive. Anyway, you are correcyt- it is very sad. Mostly because the reason they’ve been able to impose these measures is the market share they control, so brokers only have themselves to blame. I and many others have been screaming and agitating about this on every forum possible, for over a year. Ignore the non banks at your peril has been the message, but sadly its been largely ignored. I’m an optimist however, and don’t believe it’s too late to even the ledger a little bit. All of us acting now to support the non banks with about 15-20% of all future business, and I believe the banks will unwind some of these measures. One thing is for sure- they certainly wont if they continue to dominate the market like this. It will only get worse for brokers. Much worse. By the way, Mortgage Choice has Homeloans ltd and Firstmac on their panel, and have run non bank PD days to try and get some of their guys heads out of the sand. I’d be very interested to know ow many of them have started supporting either of those lenders.

Xerxes August 5, 2009

Briz, I’m glad you gave me the due respect line. Very funny.

My question didn’t come from ignorance, it was a leading question. It was an obvious set up question for you to knock down & get other brokers to consider who they use.

I’m in 100% agreement with you.