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In a surprise move to most, Challenger Financial Services announced last week it has sold out of its mortgage businesses, to National Australia Bank for a sum of $385m. The transaction includes Challenger’s 3 aggregator companies, mortgage management arm and a stake in Homeloans Limited*.
The strategy for the now NAB owned and controlled aggregator businesses will be interesting to see, particularly given NAB has performed well below CBA and Westpac in gaining market share in recent times. (As highlighted by Sal’s 2008 to 2009 nMB sales comparison below.) The notion of increasing mortgage market share through brokers by owning the aggregator vehicle is one that will be interesting to see.
Alternatively, maybe this is a further part of the NAB’s continued push to convert mortgage brokers to multi-skilled insurance sales people. Maybe a bit of both.
The reaction of the other 3 major banks and how they will now deal with NAB as a “broker customer” will also be a fascinating sideline! Given CBA already has a stake in the broker space, will ANZ and Westpac look to follow?
Draft regulations under the new National Consumer Credit (NCC) Protection package have been released. The package of regulations comprises: the NCC regulations, transitional regulations, fee regulations and regulations relating to the electronic transaction act.
There have been a number of changes since the previous draft, the main ones being: debt collectors given a 12 month period of grace; retailers providing credit facilities still exempt (pending government determining a workable solution); responsible lending provisions for mortgage brokers has been brought forward to 1 January 2010 (whilst ADI’s and registered finance companies commence 1 January 2011).
The annual cost of holding a licence (note this is still in draft form and therefore subject to change) is set at around $450 for a single operator; $2,700 for 5 – 10 person business; $10,000 for 30 – 50 person business and $21,000 for more than 100 person business.
The next step in this reform process will be the release of further regulations over the next few weeks and consultation on the current released regulations due to close 9th September.
At its August Board Meeting, the RBA held the cash rate steady at 3.00%. The Board summarised its decision by saying: “…. the present accommodative setting of monetary policy is appropriate given the economy’s circumstances. The Board will continue to monitor how economic and financial conditions unfold and how they impinge on prospects for sustainable growth in economic activity and achieving the inflation target.”
Gerald Foley - Managing Director
* Homeloans Limited has a shareholding in nMB.
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nMB Performance - 2009 FY
Loans submitted by nMB brokers in the ’09 financial year reached $2.6b compared to $1.4b in the ’08 financial year. This represents a YoY increase of $1.2b or 86%. Factors contributing to this strong result include the successful acquisition of the Mosaic business and significant productivity gains in each of our major markets.
The ’09 FY has seen a notable shift in the distribution of nMB sales, favoring three of the four major banks. Although the YoY Top5 lender rankings remain unchanged, their respective share of nMB’s business has. CBA, Westpac and ANZ have all super-glued their nMB rankings by grabbing market share from second tier and non-bank lenders.
CBA closed-out the ’09 FY as nMB’s number one lender with a share of 29.7% up from 21.6% in ‘08. Westpac held second place and also increased their YoY share from 19.6% to 21.4%. ANZ rounds up the gainers, holding third spot with a share of 16% compared to 11.9% in the previous year. St. George and HomeSide maintained their nMB rankings but realised a decline in their share of nMB business.
nMB Sales Meetings It was a pleasure meeting with nMB brokers at our August sales meetings across the states. Before closing off the structured content, we discussed nMB’s current performance and bullish plans for 2010. During this time, common concerns were expressed by brokers around the commitment of major banks to the broker channel. Matters such as bank imposed KPIs that affect commissions and accreditations topped the list.
Our view is the broker channel is a consumer or demand-side driven channel. It is not bank or supply-side driven. This means that as long as consumers choose a multi-brand choice model over a single brand option, the broker channel will thrive. This theory seems to be supported by at least two of our major lenders in their recent statements and actions.
1. In the latest edition of Mortgage Business magazine, Glenn Haslam ANZ General Manager of Specialist Business confirmed the bank has no plans of changing its broker accreditation policy. Glenn was quoted as saying, “We have no plans to replicate the policies of other lenders regarding minimum business and recognise that brokers providing ANZ with minimal business are actually opportunities to secure more new business and we’re keen to talk to them.”
2. On Tuesday 18 August, the NAB announced it has reached agreement to purchase Challenger’s mortgage management business for $385m. The acquisition includes Challenger’s three aggregator businesses and their multi-brand ‘white label’ product capability. A NAB Personal Banking Group Executive, was quoted as saying the acquisition of the Challenger mortgage management business increases NAB’s presence in the important broker distribution segment.
Featured lenders for the August sales meetings included two of our Events Sponsors, Adelaide Bank and BankWest. Adelaide Bank covered their Smart Suit of commercial products and BankWest discussed their current range of residential loans and provided a snapshot of a soon to be released market leader. We thank Adelaide Bank and BankWest for their continued support of the nMB Events Program.
nMB’s content focused on the common errors made with FHOG applications and how they can be avoided in an effort to improve submission quality. We thank CBA for providing the presentation.
The nMB Software tip of the month included a demonstration of a new calculator to help determine a client’s annual salary based on a YTD payroll notice. If you were unable to attend the sales meetings and wish to learn more, please contact your nMB BDM.
Sal Cinque - Director, Sales and Marketing
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Time to Fix ?
In the August quarterly statement on Monetary Policy, the RBA upgraded its forecast for the national economy and said official interest rates could move to a more normal or higher setting, if recoveries in the global and domestic economies proved durable.
With the RBA signalling the possibility of higher interest rates many of your clients may be asking you, “Is now is the right time to fix”?
Most commentators are saying their will be no interest rate rises before the end of the year, with most tipping the middle of next year. The majority believe, once they commence, rates will swiftly rise from 3% to 4%, but few are forecasting hikes beyond that.
The futures market has priced in a two percentage point rise in the cash rate between now and December 2010. However, the latest long term forecast (2009-2024), report by BIS Shrapnel, said the Australian economy’s most difficult phase will occur over the next year, forecasting a 17% decline in business investment, falling household incomes and weak consumer spending, which is hardly a recipe for interest rate rises. With the majority of the opinion on likely rate rises, borrowers may react and fix into a rate that is already well above the current standard variable rates. Five-year fixed-rate home loans are about two percentage points more expensive than variable rates now.
The Commonwealth Bank and NAB are offering standard variable mortgage rates of 5.74%. ANZ and Westpac have set their standard variable rates at 5.81%. With lenders offering discounts to the standard variable for packaged loans this rate can be as low as 5.11%, and even less for a basic product. In contrast, five-year fixed-rate mortgages are offering average rates of 7.59%, according to nMB MBS Interest Rates, and most three year rates are greater than 6.80%.
For people wanting to keep to a strict budget and control what payments are going out each month, then a fixed rate gives you that assurance. Most fixed rate loans allow you to make minimal extra payments and break costs can be large if the house needs to be sold or loan repaid within the fixed rate period.
The alternative can be a split rate loan, which can gives certainty of a fixed payment on a portion of the loan and the ability to capitalise on the current low rates by making additional repayment on the variable portion.
Sarah Zecevic - Lending Services Manager
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Commission processing A key component of any aggregation business is its commission processing department. Each month the aggregator is responsible for receiving and reconciling dozens of lender reports containing thousands of lines of data. These reports, in most cases, need to be reconstructed to maintain a level of consistency prior to processing. To add to the pressure, there is usually a deadline each month where this all has to occur.
At nMB we have set a benchmark for processing, reconciling and disbursing all commission payments by the 25th of the each month. I am happy to say that since we commenced business back in September 2001, this benchmark has been met each month, and in most cases, bettered.
Our commission processing team prides itself on being able to process 100% of all commissions every month, including upfront, trail, and any ancillary income from non - mortgage sales.
nMB management made the decision from the outset not to carry a sundry or “orphan” commission account, as many other aggregators do. The winners are of course our brokers who can remain confident that every single commission dollar received each month is reconciled and disbursed.
Kon Avramidis - Director, Operations
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Graeme Vimpani - nMB Broker, AlphaLoan Mortgage Group
1. My all time favourite food is:
Sunday Roast lamb with baked potatoes –GOLD!
2. The last book I read was:
A Time to Die (about the Russian submarine disaster a few years back – highly recommended)
3. Lately I’ve been listening to a lot of:
My i-pod on “Shuffle”
4. My favourite saying is:
“The greatest danger is not that our aim is too high and we miss it… but that it is too low and we reach it”.
5. My Ideal Sunday involves:
Wake up… swim/surf… big breakfast, reading the papers… round of golf… bbq with friends… movie and relax at night
6. My biggest inspiration is:
Successful business entrepreneurs
7. If I didn’t live in Australia I would live in:
Not sure?!?! Probably Europe somewhere?!?!
8. The most extravagant gift I have bought myself was:
Nothing really?!?! How boring!!!
9. If I could have dinner with anyone (dead or alive) I would choose:
Greg Norman, Vince McMahon, Bruce Willis, Gene Simmons, Angus Young and Anne Hathaway
10. Three things I would love to do in my lifetime are:
• Take a year off and travel
• learn to fly a helicopter
• play lead guitar in front of a packed stadium at Wembley
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nMB September Sales Meetings
Please make note of the relevant nMB September Sales Meeting date in your diary:
Brisbane Tuesday 1st September
Sydney Wednesday 2nd September
Melbourne Friday 4th September
Gippsland Thursday 10th September
Please RSVP your attendance to your state BDM.
nMB 2009 Christmas Parties
We are pleased to announce that the venues and dates for nMB’s 2009 Christmas parties have been finalised. The parties will take place on the following nights:
QLD Tuesday 8th December
NSW Wednesday 9th December
Vic Thursday 10th December
Look out for the invite later this year.
