MORTGAGE originators are targeting business lending for future growth following their success in the housing loans market.
From a standing start in the mid 1990s, mort-gage originators now arrange about 30 per cent of all housing loans.
If they achieve similar success in business lending it will have a big impact on the banks and traditional finance brokers.
While some originators are sticking to their ‘home loans’ knitting, others such as AFG, Lawfund, Loanscorp and Mortgage Choice are already active in the business loans market.
“It’s the next growth area in the third-party introducer market,” Loanscorp managing director Anne Marie Syme said.
Ms Syme said the number of banks paying commissions for business loans had grown from one a year ago to 10 currently.
Most originators have focused to date on property-secured term loans, but they anticipate moving into more complex products like leasing and cash-flow lending.
“Over the next one to two years, originators will offer the full product range,” Mortgage Choice State manager Murray Sebbes said.
AFG, which is a wholesale service provider to mortgage originators, has been at the forefront of the trend.
Director Mark Ash-down said AFG had employed specialist commercial lenders for about two years and currently approved around $20 million of business loans per month in WA.
Mr Ashdown said he expected this figure to grow as AFG became more focused on the business loans market.
The service was originally offered as a value-add for AFG’s members, who could refer clients to AFG’s commercial lending experts.
Now mortgage originators are gaining accreditation so they can manage commercial lending opportunities in their own right.
Mr Sebbes said Mortgage Choice conducted a business lending trial 12 months ago and was now rolling out the concept through its network.
He emphasised that only originators with appropriate skills and experience handled business lending.
“We have 40 originators in WA and only 10 are accredited for commercial lending,” Mr Sebbes said.
The entry of mortgage originators into business lending stemmed from the banks’ decision to start paying commissions on business loans.
The commissions were originally targeted at finance brokers, who traditionally charged their clients on a fee-for-service basis.
This traditional business model is starting to change, as finance brokers are increasingly remunerated by the banks.
The push by mortgage originators will add to the pressure for change.
“There will be lots of pressure on the ability of traditional brokers to charge up-front fees,” AFG’s Mark Ashdown said.
