How warehousing attracts mortgage brokers to the personal lending space
More and more mortgage brokers are entering the personal loan business and changes are taking place higher up in the credit system that are helping them make this transition.
Funding models that were common in the residential mortgage lending ecosystem, such as RMBS transactions and warehousing, are also growing in the personal loan market.
SocietyOne reaped the rewards. This year alone they priced an ABS deal through NAB which saw their financing capacity increase, and last week made a similar move with Westpac to secure $ 200 million in additional warehouse capacity. .
It’s this type of financing, according to John Cummins, chief investment officer of SocietyOne, that helps mortgage brokers get into the personal loan business because it recreates the terms they’re used to.
“Warehousing financing promotes volume growth,” he explained. “It’s best when you have a good amount of volume going and you add products, you can put them in the warehouse as well. You don’t have to establish a whole new funding mechanism just because you’ve launched a product. This gives us some goals. “
“When you have brokers, they want an immediate response. This type of funding allows you to provide immediate answers. There is no doubt that if you know that you have a faucet that you can turn on that is quite large, when you build it you develop a capacity for different volume and products.
“You have unsecured personal loans, which are a big brokerage product. Then with secured loans, where someone has the car in the driveway who can offer them a discount on the loan by putting it back as collateral, you don’t have to go and 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 clients, and when you do that the broker will be dealing with you rather than another broker.”
“We have brokers who like the idea of a secured personal loan because customers get used to the fact that they don’t have to go out and buy a new or used car, but can use the car. from the aisle.
“Understandably, brokers have warmed up to this. We wouldn’t claim to be the only ones doing it, but we’ve done a little bit of effort in 2021 to get it across the line and we’re seeing good volume coming in. “
“It’s like mortgages: some want a mortgage with a payoff, others want to keep it separate and pay it off. We know that in personal loans, it is people who do not want a withdrawal. 60% of those who borrow money from us have a mortgage, and they could certainly get it cheaper than they could get a personal loan from us, but they want to keep the money separate.
“These are their personal needs. One wonders why people who have a mortgage take out a personal loan at a higher rate, but it is because they have a particular way of managing their finances. Most people see their mortgage as sacrosanct, they hate the idea of redesigning it and rolling it back, so they therefore take out a no-frills mortgage with the lowest possible rate and no features.
“The problem is, when it comes to buying a car and especially a used car, they don’t have access to finance because they’re locked in with a mortgage. They have to go out and find the cheapest rate possible, knowing that they are a good borrower because someone gave them a mortgage.
“Some things mean you can deploy a range of non-mortgage products specific to the individual and the asset they want to buy. “