With more than 20 years on the job, Alex Ralec JP has seen countless changes in the finance industry.
MPA spoke with the Sydney broker about the ways credit policy and regulation have changed the lending landscape over the past two decades, and why he believes technology has been both a blessing and a burden.
From Wizard to Aussie
Ralec began his finance journey in 1997 as an accountant for Wizard Home Loans in the northern Sydney suburb of Artarmon. Two years later he opened his first mortgage broking franchise for the same brand.
“Unlike the majority of mortgage brokers, I’ve never worked for a bank,” he says.
“I had no sales experience. Whilst being an accountant helps if reading tax returns, there’s not much else it helps with.”
At the time with Wizard, broking was quite a different kettle of fish.
“We were very little in the broker space, predominately selling our own Wizard branded home loans,” he says.
“We were all dedicated, committed, we were receiving no trail income, just an upfront payment.”
Wizard was sold to GE Money in 2004. Just four years later, during the GFC, the future of Ralec’s business was thrown into uncertainty
“In 2008, GE Money got out of mortgages across the world. We were like orphaned children just waiting to be collected, so we went to the competition,” he says.
“CBA had purchased a share of Aussie home loans and this enabled CBA to buy billions of dollars of mortgages from GE money.
“Aussie’s retail network was maybe 20 stores at the time and they acquired about another 130 or 140 stores – and that was instant scale for them.”
Ralec opened Aussie franchises in Hornsby and Mona Vale in 2009 and has now marked 11 years with the brand.
How tech has played a part
Technology has flourished over the past 20 years, however when it comes to submitting loan applications, it hasn’t all been positive.
“Whilst it’s helped in a number of areas – technology has been a great tool to us – it’s also burdened us,” he says.
“We now have to scan all of our documentation through, which is fine – we’ve got no problem with it all, it just adds layers of complexity.”
Ralec says the process used to involve faxing a five-page application form along with a couple of payslips and a bank statement.
“We controlled the whole thing and the whole process; the valuation ordering, the solicitor getting documentation. We were kings of the hill – we were doing everything ourselves,” he says.
Another big difference was that when he started in the industry, not many people had email addresses.
“Wizard didn’t even give the stores an email address, so we had to find our own domain name,” he says.
“Who could ever imagine now conducting this business without email?”
Equity is no longer king
Ralec says much of the deals that brokers used to put through were possible thanks to equity. That changed in recent years following APRA’s move to tighten investor lending.
“We used to be viewed more as an art than a science where equity was once king. If someone had equity, there’s a home loan to be written there,” he says.
“We had all the tools at our disposal, low doc loans, no doc loans, it was just all available to us from all the banks.
“It was a matter of giving the customer the right product to suit their requirements.”
After property prices surged across the country and more and more borrowers found themselves equity rich, regulators moved into slow things down for investor lending, which meant a changing environment for brokers to work in.
“That’s where we have to once again think and find out which lender will lend those borrowers the most money while still ticking all of our compliance boxes and regulations as well,” he says.
Brokers now write close to 60% of all home loans, but this hasn’t come about through great service alone, Ralec adds.
More and more customers are finding that a trip to the bank won’t provide the lending solution they require to fulfil their goals.
“We consider ourselves not so much as mortgage brokers but more as niche lenders. The customers come to us looking for an answer and we respond to that answer by giving them a product that will satisfy them.”