The whole picture: Challenges mount for wholesale funders

Continued pressure on the cost of funds has made it difficult for wholesale lenders to compete with the Big Four on price alone. MPA asks funders to what other opportunities exist in this market…

Brett Halliwell, GM distribution, Advantedge

What are the biggest challenges facing wholesale funders?
In the current environment, cost and availability of funding, particularly for those who are reliant on securitisation, are the biggest challenges facing wholesale funders. Wholesale lenders who have access to balance sheet funding – like Advantedge – have a distinct advantage at the present time and into the foreseeable future.

How do these challenges impact mortgage managers and originators?
Mortgage managers who don’t have an established partnership with a stable balance sheet funder can pay a higher premium for funding. However, mortgage managers who have a developed relationship with a stable financial institution are able to access funding to lend to customers with greater certainty on cost and availability. Advantedge is able to access funds provided under NAB’s AA- rated balance sheet, which is amongst the strongest in the world.

What can we expect to see in terms of white labelling in future?
The growth in white label lending has been a runaway success phenomenon across the industry, with volumes and popularity growing at an unparalleled pace. In the case of our own home brands – FastLend, ChoiceLend and PLAN Lending – they have shot up the lender league panels to now be consistently placed in the top four or five. This is because more and more brokers are opting to regularly use home brand loans to provide benefits to their customers, including market leading interest rates.

Allan Savins, Chief Operating Officer, Resimac

What are the biggest challenges facing wholesale funders?
One of the challenges facing wholesale funders and lenders in general is the increased cost of funding. There has been significant volatility in funding costs which wholesale lenders have had to manage. Resimac is fortunate to have proven competency in treasury management, with an RMBS transaction completed as recently as June of this year.
Another challenge for wholesale lenders and their mortgage managers is dispelling fears over providing borrowers with alternative documentation and specialist loans. There is a perception that if the product has a higher interest rate it may not be suitable; however, that is not the case as long as the situation delivers a financial benefit to the borrower.

What are you doing to support your distribution partners?
Resimac supports its distribution partners by providing product innovation, technology and a true white label offering. In a climate where there is little change to the product landscape, Resimac offers its distribution partners loan features and products that are unique to better meet the needs of borrowers. This includes the niche Specialist Lending product suite, a National Rental Affordability Scheme (NRAS) policy, and product enhancements like Offset, BPAY, and Fixed Rate Lock.

In addition to these front line changes, Resimac also provides distribution partners with training and education, including road shows focusing on responsible lending and the state of the economy, credit training workshops for distribution partners and their staff, and fraud detection training.

Do you have any product innovations on the horizon?
Resimac continuously manages a pipeline of product concepts in various stages of development. The intention is to ensure new/enhanced products and features are rolled out periodically to give our distribution partners the tools to effectively compete in this competitive market. The recent simplification of our Specialist Lending products is an example of a significant change made to this product suite to make it easier to understand and apply to a broader borrower base.

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