Now occupying 74.1% of the market, the rise of mortgage brokers has been rapid and well documented.
Competing with a tailored service that offers a variety of options for the best interests of the borrower, the direct channel is in raptures trying to figure out how best to defend its dwindling market share.
As brokers move away from major banks in search of diverse lending options, can the oft-misunderstood mortgage manager use the same tactics on brokers that’s made the third-party channel the preferred choice among borrowers?
“We strive to be the broker of brokers,” said Darren Liu, executive director of FINSTREET (pictured above with Tamer Abdelatty, head of operations).
“If a broker chooses us as their mortgage manager, they expect us to provide tailored advice and a broad range of options - just as customers choose brokers for the same reasons.”
In a similar tale to the mortgage broking industry, the non-bank sector has grown in leaps and bounds compared to where it was a decade ago.
A recent ScotPac survey found 90% of Australian SMEs have declared they are open to partnering with a non-bank lender, a remarkable turnaround from 2018 when 44% of SMEs said they would not consider non-bank lending.
Furthermore, nearly half of those are planning to engage a non-bank - a dramatic shift from 2014 when just 7% of SMEs said they would find a lending solution from outside the banks.
Liu said the non-bank space increasingly plays a role in providing supplementary products to the major banks because many customer needs are not being met by the major banks.
“This could be due to regulations, returns, risk controls, compliance, and other factors,” he said.
“This is the reason Finstreet and other non-banks exist – to play in a market where the banks don’t play.”
Whether it’s NDIS, SMSF, low-doc, expat, or non-conforming loans, each non-bank lender has its own specialty.
For example, Liu said Pepper Money and Bluestone specialise in non-conforming loans, Brighten focuses on expat lending, and Resimac specialises in low-doc lending.
“While these markets are smaller compared to the overall market, they are highly valuable for consumers,” Liu said. “When considered together, they create a dynamic and competitive market.”
While some may see the benefit of these niche segments of the market, it means nothing if the broker can’t access or understand the policy.
Darren Liu, previously Australia’s number one-rated broker in 2020, understands this all too well.
“Brokers value their time,” said Liu. “Brokers don't have the time to learn all lenders’ policies and products on their panel and many resort to using the same two or three lenders that have become familiar.”
FINSTREET aims to fill this gap by acting as a broker of the non-bank space.
“Brokers come to us because they don’t need to be familiar with every policy or product themselves,” Liu said. “They rely on us as their broker to handle the details. Our team works on the deal, provides expertise, and offers solutions.”
As mortgage managers, the company has nine lenders on its panel, including white-label products from Pepper Money, Resimac, MA Money, and Brighten.
It also features three private lenders and four exclusive products only available through the mortgage manager channel.
“If we only had three lenders on our panel, similar to other mortgage managers, why would brokers choose us?” Liu said. “They wouldn't.
“With FINSTREET, brokers don’t need to go on another panel for another solution.”
The idea is that if a broker can’t find a deal through a bank, they come to FINSTREET. If the white label or non-bank options couldn't get it done, the mortgage management team look at private lending.
And if private lending couldn’t get it done, then it’s probably not a good deal in the first place.
“We have everything covered for them.”
When borrowers choose to work with a mortgage broker instead of going directly to a bank, they benefit from access to a wider range of products and personalised advice.
Brokers can compare offerings from multiple lenders, ensuring that borrowers find the best fit for their needs, whereas going direct limits them to a bank's own products and potentially biased recommendations.
For brokers themselves, partnering with a mortgage manager like Finstreet offers significant advantages over dealing directly with lenders.
Mortgage managers provide access to a broad panel of lenders, including those not available directly, and offer specialised expertise in handling complex or niche cases.
They also streamline the process by managing administrative tasks and negotiations, allowing brokers to focus on their clients and enhancing their ability to find optimal solutions.
Mortgage managers like FINSTREET are well-positioned to capitalise on this shift by becoming an essential intermediary between brokers and non-bank lenders.
"Our role as a mortgage manager is to bring all these niche non-bank resources together and be a strong non-bank brand in the market,” Liu said.
“We aim to provide more transparency to consumers and brokers by continuously sponsoring, engaging with the industry, and building community."
