ME Bank CEO Jamie McPhee believes that it’s more important than ever for brokers to educate customers about non-major alternatives and help break the big four dominance.
ME Bank CEO Jamie McPhee tells MPA why he believes that it’s more important than ever for brokers to educate customers about non-major alternatives and help break the big four dominance.
MPA: What are the biggest challenges that the mortgage industry faces at the moment?
Jamie McPhee: The major banks have 83% of mortgage share. Such a large concentration of the mortgage industry with major banks means that competition is reduced, and a lack of competition over the longer term is never a positive outcome for customers. Pleasingly, however, non-major banks like ME Bank are starting to generate greater awareness of their highly competitive offers with customers and there are signs customers are starting to take notice and are starting to make the switch.
MPA: Are there any areas of the country, or sectors of the market (eg, first homebuyers), that are experiencing strong demand for mortgages at the moment?
JM: If anything, first homebuyers as a sector might actually be going backwards due to changes to the incentives provided by some state governments. Interestingly, ME Bank continues to see relatively strong demand for its first home savers account, with demand increasing by 85% during the last financial year. Customers respond when banks step in to help people buy a first home. We have also noticed an increase in fixed rate activity in recent months, based largely on the low fixed rates currently being offered. ME Bank is experiencing above-system demand for fixed rates – over 20% of total new home loans.
MPA: How do you think the current environment of falling interest rates will affect the mortgage market over the coming year?
JM: Over time, falling interest rates will drive a greater demand for residential property. The other key driver is consumer confidence rebounding, which will be driven by people feeling more confident about job security. In addition, lower rates improve the affordability for first homebuyers. It’s worth noting that as the RBA cuts interest rates, deposit rates also fall, including term deposits. While some banks like ME Bank continue to offer term deposit rates at a position well above the cash rate – much higher than they are traditionally priced – some investors may start to look towards investment properties, giving a further boost to the housing market. We are starting to see a modest rise in house prices which is a positive sign of recovery, and is likely to stimulate further market growth into the future.
MPA: Are there any other trends that you expect to see in the mortgage market over 2013?
JM: As non-majors like ME Bank continue to raise awareness of their better offerings across service, fees, rates and flexibility, we would hope to see a continued movement away from the big four and a steady increase in competition.
MPA: How do you rate ME Bank’s relationship with mortgage brokers, and can it be improved?
JM: ME Bank made a very positive entrance into the mortgage broking market in November 2011. Within a year we’d established great working relationships with 11 aggregators, and more than 2,500 brokers are now accredited to sell ME Bank home loans. We have received much positive feedback, particularly on ME Bank’s position in ensuring all our customers receive fairer treatment. Our brokers are also our customers and we take our commitment to them seriously. It’s why brokers are given equal access to our BDMs and credit teams. We will continue to work with brokers to understand the difference their clients will experience with ME Bank.
MPA: What is ME Bank’s key value proposition when it comes to the mortgage broker channel?
JM: As mentioned, ME Bank is the genuinely fairer banking alternative and our promise to our customers is to provide straightforward, transparent and low cost products combined with great service. For brokers, this means equal access to BDMs and credit teams regardless of volumes, and to uniformly provide quick decision times. For example, we offer the same low rate even for smaller loans. Another example is we’ve offered a lower standard variable rate than the majors ever since we became a bank in 2001.
MPA: What will take for the mortgage market dominance of the big four banks to be eroded?
JM: Educating customers that non-major banks like ME Bank are a genuine banking alternative. We hold the same level of security but provide a fairer banking experience. ME Bank believes that mortgage brokers play an important role in educating customers about banking alternatives like ME Bank. Their clients go to them as they are looking for a trusted adviser who has their best interests at heart, so we see the brokers we work with as very important to helping get the word out to Australians that they don’t need to put up with the major banks. There are much better options – a genuinely fairer banking option – and they should vote with their feet.
