Non-bank rates attract more brokers

Despite all lenders raising their variable rates, more brokers are turning to non-banks due to pricing, according to a new survey.

A growing proportion of brokers recommended a non-bank to their clients in September because of their interest rates and product pricing .

The results come from the latest monthly Broker Pulse survey from Momentum Intelligence.

The survey of 237 brokers – conducted between 1 and 14 October – found while 72 per cent of broker respondents recommended non-major banks to clients because of their pricing in both August and September, a growing number chose non-banks for this reason last month.

Indeed, the Broker Pulse survey found that there was a 10-percentage point month-on-month jump, with 47 per cent of brokers citing “product pricing” as a reason for recommending non-banks in September.

More brokers also recommended major banks for this reason, up from 40 per cent in August to 45 per cent in September.

Similarly, the proportion of brokers choosing both non-banks and major banks for their turnaround times (the number of business days taken to reach an initial credit decision) rose in September

Almost 40 per cent of broker respondents said the number of business days taken to reach an initial credit decision was the primary reason they used a non-bank in September (up from 27 per cent in August), while 35 per cent said they used a major bank (up from 29 per cent) due to this.

But it was the non-major banks that stood out when it came to turnarounds, attracting the highest proportion of brokers out of the lender segments (50 per cent) last month.

The findings come despite a small increase in turnaround times across the non-bank segment and small authorised deposit-taking institutions [ADI] .

Non-bank turnarounds reportedly rose two days month-on-month (to seven days), while small ADIs were up two days (to eight days) in September.

Brokers reported that turnaround times increased across seven out of nine non-banks and five out of 11 small ADIs.

On the other hand, turnaround times remained at five days at the large ADIs (those used by more than 20 per cent of broker respondents) for the third consecutive month, with brokers reporting that they rose across only four out of 12 lenders in this segment.

Overall, turnaround times grew mildly across all lenders from five days in August to six days in September, the Broker Pulse data showed.

Client preferences also drove more usage of non-banks, with a fifth of brokers recommending them in September due to this reason, up from 6 per cent in August.

A third of broker respondents said they chose a major bank due to client preferences (up from 27 per cent in August), while 35 per cent used a non-major bank.

Overall, non-major banks were the most commonly used lender segment, with 86 per cent of broker respondents reporting that they used them in September (up from 83 per cent in August).

The major banks closed the gap with their non-major counterparts, with 82 per cent of brokers reportedly using them, up from 77 per cent the previous month.

Commenting on the broker usage of lenders, Momentum Intelligence director Michael Johnson said: “Pricing and other financial incentives, such as cash backs, have always played an integral part of the equation for brokers and clients. 

“However, with turnaround times now at extremely fast levels and with the pressure on the cash rate, we’re seeing product pricing grow in importance month-by-month.”

Recent data from the Australian Finance Group (AFG) revealed that turnaround times were at the fastest since AFG reporting began in 2018, averaging at just over 17 days.

The aggregator’s Mortgage Index also showed that loan volumes were down 4.0 per cent, indicating that the “interest rate levers” being pulled by the Reserve Bank (RBA) – which has increased the cash rate six consecutive times since May this year – is “having the desired effect”.

To find out more about the Broker Pulse survey and participate in future surveys, visit the Broker Pulse survey website.

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