In the Press
28 November 2007
One in three borrowers uneasy with non-bank loans
More than one-third of borrowers are uncomfortable with the concept of a non-bank lender following the sub-prime crisis, suggesting scare campaigns by major banks may be having some effect.
An Australian Mortgage Council survey of 2000 consumers in October found the major fear borrowers had of non-banks was losing their home if the lender went out of business. Consultant Retail Finance Intelligence found 31 per cent of respondents were "uncomfortable" to "very uncomfortable" with borrowing from a non-bank lender such as Wizard. Of the remaining sample, 40 per cent were ambivalent while nearly 30 per cent were "very" to "fairly" comfortable with non-bank loans.
The survey follows comments from chief executives such as Westpac's David Morgan which deride the stability of non-banks. The funding costs of non-banks which rely on securitisation have risen relative to majors as credit spreads widened since July. National Australia Bank has emphasised security in its radio advertising, while Australia and New Zealand Banking Group's head of personal division, Brian Hartzer, has said the bank's marketing will "dial up either subtly or more directly on the strength of the institution".
Of the third who were uncomfortable with non-banks, 70 per cent cited as the key factor the fear they could lose their home if their lender went out of business.
When deciding to re-finance, the key trigger for choosing a different lender was not price but poor customer service. And despite several consecutive interest rate rises, 17 per cent of respondents said they did not know what their mortgage rate was.
RFI's research is used by Australian Mortgage Council members in their product strategy and marketing.