More and more mortgage brokers are getting into the personal loan space, and changes are taking place higher up the credit system that are helping them to make that transition.
Funding models that have been commonplace in the residential mortgage credit ecosystem, such as RMBS deals and warehousing, are now expanding within the personal loan market too.
According to SocietyOne chief investment officer John Cummins, it is this type of funding that helps mortgage brokers to tip their toes into the personal loan water, as it recreates the conditions that they are used to.
“Warehousing funding is conducive to growing volumes,” he explained. “It’s better when you’ve got a good amount of volume going through, and you’re adding product, you can put them in the warehouse as well. You don’t have to go set up a whole new funding arrangement because you’ve launched a product. It kicks a few goals for us. “
“When you’ve got brokers, they want an immediate answer. This type of funding enables you to give immediate answers. There’s no doubt that, if you know that you have a tap that you can turn on that is quite substantial, when you build it you build capacity for volume and different products.”
“You have unsecured personal loans, which are a big broker product. Then with secured loans, where someone has the car in the driveway that can give them a discount on the loan by posting as collateral, you don’t have to go buy a new car to get the loan.”
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“It ticks an extra box, and from what we can see, it gives brokers extra value to add to their customers, and when you do that the broker will deal with you rather than another broker.”
“We’ve got brokers that love the idea of secured personal loan, because customers are getting used to the fact that they don’t have to go out and buy a new or used car, but can use the one in the driveway.”
“Naturally, the brokers have warmed to that. We wouldn’t pretend to be the only ones who do it, but we put a bit of effort in 2021 into getting it across the line and we’re seeing good volume come through.”
“It’s like mortgages: some want a mortgage with a redraw, others want to keep it separate and pay it down. We know that in personal loans, it’s the people who don’t want a redraw. 60% of those who borrow money off us have a mortgage, and they could definitely redraw that cheaper than they could get a personal loan from us, but they want to keep the money separate.”
“It’s their personal needs. You wonder why people who have a mortgage would take out a personal loan at a higher rate, but it’s because they have a specific way that they manage their finances. Most people see their mortgage as sacrosanct, they hate the idea of redrawing and driving it back up, so consequently they take a no frills mortgage with the lowest possible rate and no features.”
“The problem is that, when it comes to buying a car and particularly a used car, they don’t have access to finance as they’re locked into a mortgage. They have to go out and find the cheapest possible rate, knowing that they’re a good borrower because someone gave them a mortgage.”
“There’s a few things that mean that you can roll out a range of non-mortgage products that are specific to the individual and the asset that they want to buy.”
