The big four are scoffing at heady claims made by Yellow Brick Road (YBR) frontman Mark Bouris, after he told News Ltd reporters he’s confident his Macquarie-backed broking house can double its monthly sales of new home loans within a year, creating a ‘tipping point’ that will force at least one of the majors to cut rates.
Bouris says that, although the Macquarie/YBR share of the $1.1 trillion mortgage market is currently miniscule, the duo could grab a meaningful share of the flow of new home loans within a year. He says they would need to settle around $350 million worth of loans a month – roughly 5% of the value of loans sold through bank branches.
''Banks aren't going to take much notice of us unless we're in that 5 to 10 per cent range,'' Bouris tells News Ltd. ''If we can take market share from them, it becomes a volume game. They will have to fight back on volume, and to fight back on volume you have to fight back with pricing.'”
But a Westpac spokesperson says the possibility, while no-doubt well-intended, is faint at best.
“We’ve got a discount up there at the moment of one full percentage point off loans over $500,000 and 90bps discount off our standard mortgage variable rate out of between $250-500,000. So everyone’s out there competing for business. I’m sure Mr Bouris is keen to talk up his business and he’s trying to replicate what he did with Wizard 20 years ago.”
“The interesting thing from YBR is, in effect, they’re having white label mortgage products provided by Macquarie and, depending on their funding (I don’t think YBR is a deposit-taker), he might be able to access some cheaper wholesale funding costs - and there’s no doubt that those costs could come down,” says the spokesperson.
#pb# Westpac, on the other hand, is increasingly taking up funding its home loan book off the back of deposits.
“So, in a way, we’re talking slightly different sources of funding. But it would be interesting to see the comparison between the rates that they’ve got out there.”
Westpac says that, at this point, it doesn’t view the YBR/Macquarie partnership as a significant threat, but that the major lender ‘wishes them luck’.
“This is the dichotomy: Loads of people are going on about competition in the big four banks…There seems to be a fair amount of competition, but everyone is fighting for what, at the moment, is a smaller cake, because people are not borrowing as much.”
“So, you’ve got people banging on about ‘there’s not enough competition’ in the market place and then you’ve got people like Bouris and ME Bank and others out there being able to offer decent rates – and that’s for the good of the market. So when we say we welcome competition, we actually do.”
Finally, argues John, it’s important to remember that Macquarie backed away from mortgages during the GFC – something many borrowers (and brokers) are unlikely to forget anytime soon and which could provide a stumbling block when it comes to customer growth.
“They’re dipping in now, at a time when they know they can make a buck out of it, whereas we’ve been constantly out there. Bouris sold; in effect walked out of the market and is now back in now that he can see a potential opening. And good luck to him. But [YBR] is tiny at this stage.”
Mark Bouris was invited to be interviewed for this article, but declined the invitation.
