Banks Unfazed As Loan Broker Numbers Swell
Sydney Morning Herald
Monday July 10, 2000
Advance Loan Direct isn't linked to the former Advance Bank, now owned by St George Bank, but the common name is more than a happy coincidence.
The newly formed mortgage broking business is 60 per cent owned by Mr Robert Whyte, a major St George shareholder and founding managing director of Advance Asset Management, and chaired by former Advance Bank chairman Mr Jim Service.
Of the company's nine lending consultants, six are ex-St George or Advance Bank.
Six months since opening for business and after convincing St George to allow it to use the name, Advance has approved $100 million in mostly residential loans, with an average loan size of $270,000.
Mr David Dyer, who owns the remaining 40 per cent of the company, believes Advance Loan Direct will benefit from the increased use by major lenders, including the big four banks, of mortgage brokers.
About 30 per cent of the loans sold are St George loans but Advance Loan Direct has a relationship with 10 lenders, including Colonial, ING Bank, Westpac, ANZ, AXA Home Loans, Citibank and Homeside.
In four years, the percentage of residential mortgages sold through brokers has increased from 9 per cent to 19 per cent and the multi-distribution strategy of banks such as Westpac mean it will probably rise. Westpac, which now claims to be writing one in four new home loans, is understood to sell about 20 per cent of its loan through brokers.
``More and more, if the banks are closing their retail branches, they have to look at variable cost distribution rather than fixed cost distribution," Mr Dyer said.
``Right now our experience is with the exception of Commonwealth Bank, which the jury is out on the banks we are dealing with are going out of their way to give us every support possible."
Because of its extensive branch network, Commonwealth Bank in particular has resisted using mortgage brokers, who recommend loans to customers from a pool of numerous lending products and usually get a fee and trailing commission from the lender. Advance gets no fees from the customer, only the lender.
Concern over fee structures and the impartiality of mortgage brokers have been the main hurdle to the industry's acceptance but in recent years the industry has taken steps to become more professional and major players such as Mortgage Choice have prospered.
The brokers are often in a good position to find home loan customers because they get referrals from real estate agencies, accountants and solicitors.
But Commonwealth Bank is reviewing its strategy in light of its acquisition of Colonial, given Colonial is believed to sell at least 10 per cent of its mortgages through brokers.
A spokesman for Commonwealth Bank said: ``From our position we are reviewing what the [Colonial] operations are and how they fit with our operations.
``We have the largest branch network of anyone and we have an online home loan application service," the spokesman said.
© 2000 Sydney Morning Herald