Phones Run Hot For Home Lender
THE SUNDAY AGE
Sunday February 18, 1996
THE Aussie Home Loans advertising campaign and its cut in interest rates on the back of last weekend's comments by the federal Treasurer, Mr Ralph Willis, has given Australia's leading mortgage originator an instant boost.
Aussie managing director, Mr John Symond, said that in the past week 12,000 prospective borrowers had telephoned AHL to inquire about its home loans - 4000 of them in Victoria.
And now he is predicting that AHL will almost double its market share within six months, lifting it from 6 to 10 per cent, putting even more pressure on the traditional lenders, the major banks.
``We've taken close to 12,000 calls. But the banks certainly would have got a hell of a lot more calls than that," Mr Symond said on Friday, four years to the day since establishing AHL.
The advertisements coincided with a decision by AHL to cut its standard variable rate from 9.25 per cent to 8.9 per cent, prompting attention from Mr Willis who held the cuts up as an example to the banks, which he declared were ``defying gravity" by keeping variable mortgage rates at 10.5 per cent.
Mr Symond said while Mr Willis was forewarned that AHL was about to cut its rates, it was ``purely coincidental" that his controversial ``phone-your-bank" remark was similar to the Aussie TV campaign in which Mr Symond urges home owners to do the same.
``He (Mr Willis) knew we were going to urge home owners to shop around, but he didn't know word for word (what was in the commercial). That (the Treasurer's comments) were purely coincidental."
But he said it ``certainly helped" boost the number of Aussie inquiries ``when you've got the Treasurer coming out and urging Australians to contact their banks and demand a better deal". Aussie Home Loans is commanding new business of about $175 million per calendar month, in a market that is not increasing. Mr Symond predicts the company will write $300 million in the next month, compared to reported averages of up to about $20 million by other non-bank lenders.
AHL's loan portfolio stands at $3 billion, including $2 billion from the past 12 months. It has also doubled its advertising budget to about $4 million. It is confident this will lead to more lending.
The sums sound slightly less impressive when placed against total market share. The banks claim 90 per cent, while AHL holds 6 per cent. But just this month, the Mortgage Industry Association released figures showing mortgage managers had lifted market share from 4 per cent in December 1994 ($513 million) to 10 per cent ($1.17 billion) in the December 1995 quarter.
``We always knew that it was only a matter of when the public became aware of safe alternatives, where they could save bucketfulls, " Mr Symond said.
``On our rate of 8.9 per cent compared to the standard variable of the banks of 10.5, that's a saving of either $145 a month (on a $100,000 loan) or $30,000 over 25 years, and that's after-tax dollars, because people have got to earn the money first, to make the payments."
If the banks are upset about the Aussie campaign and the context and the timing of Mr Willis's comments they are not saying. Basically they have told `The Sunday Age' that the Treasurer can say what he likes, but it's a competitive market and they're being competitive.
When asked if Mr Willis was bank bashing for political ends, Mr Brian Fitzgerald, senior manager corporate affairs, with Australia's largest home-loan lender, the Commonwealth Bank, said: ``Yeah, well, Mr Willis is entitled to his opinion.
We are just not commenting on it, that's all."
Referring to the AHL ``phone-your-bank" campaign and indirectly to Mr Willis's comments, Mr Fitzgerald said: ``We have seen no reaction at all from our customers." He said the Commonwealth Bank's range of products were ``more than competitive" with other lenders.
Mr Haydn Park, the National Australia Bank's group manager corporate affairs, fobbed off the Willis comments. ``You've got to remember what time of the year it is," he said.
Mr Park said the NAB had been saying for some time that there should be a cut in official market rates, but he said the Reserve Bank ``would be reluctant to make any rate cut - or vice versa - during an election campaign".
The Treasurer's spokesman, Mr Luke Lawler, denied Mr Willis was trying to gain political mileage. ``It's not a matter of attacking the banks. Mr Willis is pointing out competitive pressures that are there and taking advantage of them."
The ANZ Banking Group has announced that its fixed-rate loans for two to five years will be cut between 0.26 and 0.31 per cent and it will axe its $600 application fee for mortgages until 30 April.
© 1996 THE SUNDAY AGE
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