Mortgage Choice Plans Assault On Mortgage Lending Market

Post by Sharat on March 8, 2010 · Under Business News, Company News, banking, home loans, mortgages · Comment

The largest independent mortgage broker in Australia says it intends to launch an assault on the $1 trillion home loan market.

Michael Russell, chief executive of mortgage broker Mortgage Choice says the company is looking at various options for funding that would enable the broker to create a host of home loan products “that are every bit as competitive as the best of the products we have on our panel”.

In an interview with The Australian, Mr. Russell said that the broker needs to offer its own products in the same way as rival Aussie Home Loans already does.

Last year the property market heated up as demand was boosted by the federal government’s first time home buyers grant and despite the fact that mortgage lenders had tightened lending standard, lenders’ turnover times had increased to about a month, by middle of the year.

According to Mr. Russell that meant that the company was fielding calls from anxious first home buyers, keen to find out the status of their loan. Mr. Russell added that Mortgage Choice had no control over what was happening.

“We never want to be exposed to that again. When you sign to acquire a property, particularly first-home owners, and they put their home loan application in, it is a period of incredible anxiety. We need to be able to arrest that anxiety and let them know in a very short space of time that their loan application has been answered. That’s where, if you do have your own product, you are able to have a real consistency in the processing and turnaround time.” Mr. Russell said in the interview.

Mortgage Choice has yet to determine whether the new products will be branded as the company’s own in house product, or a third party brand will be adopted.

Mr. Russell says any new funding would need to pay its own way. Currently the brokers franchises earn the same commission regardless of which lender they choose.

“Until this point in time Mortgage Choice has chosen not to introduce its own product. My perspective is if we could go out there and source some funding and create a suite of products that is every bit as competitive as the best of the products we have on our panel, then we owe it to our customers to investigate that. I am considering a suite of home loan products that is our own, but from a branding perspective we haven’t thought that through yet — whether they will be branded as Mortgage Choice. Notwithstanding our primary objective being providing customers with a competitive products and excellent service, from a corporate perspective, any new proprietary funding arrangement would need to be accretive to our commission indexation.” Mr. Russell said.

Since taking the helm of the company last April, Mr. Russell has implemented a new strategy of selling general and life insurance to offset a reduction in commissions enacted by lenders.

At the start of 2008, Westpac became the first major lender the cut the level of commissions it paid brokers who recommended its products.

Mortgage Choice’s upfront commission is now about 60 basis points.

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