Aussie survives Rams

There is an opening in the Australian mortgage landscape for the revival of a once vital but these days lacklustre brand.

Aussie Home Loans made its name alongside Rams in the post-recession, high margin era of the mortgage market in the early 1990s.

Banks gave this pair a four or five year start before cutting margins, a time in which Wizard, Mortgage Choice and an army of emulators crowded the field.

Aussie and Rams were cheaper and louder than their competition. Both were better at organising mobile sales forces. Both had better marketing. Both, then, had a sound source of funding. Aussie from Macquarie. Rams lined up its own money. Both persevered, but found themselves dislodged from their niche as banks and imitators caught up with their rivals' business model.

Around the peak in the home lending cycle, in 2003, Aussie and Rams changed course.

Aussie chose the aggregator model, became a broker, and pushed hard on choice and convenience.

Rams stuck with lending. Super-crowding of the mortgage market and the persistent loosening of credit standards by almost all lenders saw Rams occupy the riskier end of the spectrum. Low deposit and low doc loans - often in combination - were Rams' bread and butter.

Ever contracting margins forced Rams, like its rivals, to search for cheap options. And in the firm's choice of the US commercial paper market as a source of capital, Rams sealed its fate.

The August liquidity crunch cut off Rams' funding options in that market. And Rams now finds it cannot secure the warehouse lines from banks it needs to stay in business.

So with the Rams brand in for a makeover by Westpac, who will fill the niche?

Aussie needs a new lease on life. It's current campaigns aren't really working. And while lending's been on the backburner at Aussie for a few years, the firm's management is probably willing to rev this up.

And mortgage broking's probably peaked as a business model.

The Rams niche isn't too popular with funders right now but two borrowers within two key segments - first home buyers and the self employed - will be looking around.