Looking outside the square has become the norm for brokers and borrowers
WITH LENDING restrictions from the major banks continuing to tighten, many brokers – and in turn their clients – are finding themselves left out in the cold, unable to secure loans at a prime rate.
This segment of the market is frequently underserved and undervalued by the bigger players, opening the opportunity for specialist lenders to rise up and provide alternative sources of finance.
For Aaron Milburn, director of sales and distribution at Pepper Money, providing solutions to help customers that fall outside of the prime profile is a key part of his job.
Milburn is genuinely passionate about every Australian being able to understand their financial options.
“We’re here to support the people who may not fit the prime customer profile of the major banks at any juncture of the market cycle,” Milburn says.
Specialist lenders aim to provide borrowers with a broader range of loan products than traditional banks, with an emphasis on catering to consumers who may sit outside the banks’ traditional or preferred client base.
After all, the customer doesn’t change in this marketplace, says Milburn. Rather, it’s the banks’ perception of who constitutes a prime customer that has evolved.
“Major banks typically provide a standard product, which becomes an issue if the customer doesn’t fit their profile,” Milburn says.
“A specialist or non-bank lender, however, will provide a suite of solutions which are aimed at helping more families get into more homes with the right product, first time.”
Outside the prime
With near prime currently the fastest-growing segment in the wider loan industry, Milburn believes the broker’s role is paramount in educating clients about the options non-bank and specialist lenders can offer.
Brokers who are solely focused on traditional bank lending put both themselves and their clients at a disadvantage, he says.
“If I was a customer walking into a broker’s office, I’m there because I need help,” Milburn says.
“My expectation would be that the person helping me understands all facets of the market and knows where they can find a solution for my needs through the correct lender.
But to do that, brokers need to be aware of the broader lending market beyond the majors.” This is especially important for clients who may have previously had a credit event, Milburn notes.
While their circumstances may differ from those of prime customers, these clients’ fundamental needs remain the same.
Too often, he says, clients arrive at Pepper with multiple credit hits on their files due to being steered in the wrong direction previously.
“This customer has built up the courage to come and sit in a broker’s office and say, ‘Actually, I’ve had some issues, and I need your help’, and they need to be treated with care,” Milburn says.
“If you get it wrong, the impact on the customer and their family can be substantial.
“Plenty of people see only headwinds, but I see opportunity. More brokers … will begin to understand the true value that non-bank lenders can provide for them” Aaron Milburn, Pepper Money
That family has to go home every night, sit around the kitchen table and say, ‘How are we going to get back on our feet?’, when they could have been connected to the right lender the first time.”
But the appeal of specialist lenders is far broader than many brokers may realise.
Milburn says Pepper aims to help any borrower who falls outside of the major banks’ prime parameters, and that’s an ever-expanding spectrum.
It’s not simply limited to people who’ve had a credit event.
Investors, the self-employed and families, to name a few, are all potential clients who can benefit from a specialty lender.
Year of the broker
Looking ahead, Milburn believes those brokers who educate themselves about specialist lenders will be the ones who are able to withstand changes while continuing to grow and see their businesses flourish in the future.
The results are already starting to be seen in practical terms, too.
The repeat use of Pepper by brokers for multiple deals has grown exponentially month-on-month since early 2017.
Milburn remains firmly convinced that the industry is set to grow further in 2019 and beyond. With the growing propensity to use specialist lenders over the last few years, it’s an increasingly attractive model for brokers and borrowers alike.
Based on current data, it seems that once a broker has experienced working with a specialist lender, they are inclined to keep coming back, Milburn says.
And he intends to keep pushing in this direction.
“My view is that 2019 is the ‘year of the broker’, and those that see the opportunities lying ahead will continue to capitalise,” Milburn says.
“Plenty of people see only headwinds, but I see opportunity. More brokers – and, in turn, their customers – will begin to understand the true value that non-bank lenders can provide for them.”