Having another crack at online mortgages

As business models go one of the all-time worst may be selling home loans on the internet.

Countless online mortgage companies have come and gone. The big banks with active direct mortgage sales arms report that the contribution those businesses make to overall sales is very modest.

Commonwealth Bank says Homepath accounts for around one per cent of mortgage sales. ANZ will not give a figure for One Direct but it is bound to be very low.

Analysts say home buyers like to do their window shopping on line but prefer face to face contact with a broker or lender when it comes time to do the deal.

This sorry history has not stopped former Merrill Lynch banking analyst Hamish Carlisle from giving it a shot. Carlyle got QuickDirect going in February, raised some capital in April and has been putting together a sales team since then.

Carlisle believes he has got the right business model to make a success of the online mortgage business and he reckons that home buyers will be keen to consider a low cost alternative in the current market.

QuickDirect is offering a standard variable rate mortgage for 7.39 per cent with a maximum loan to valuation ratio of 95 per cent.

There are no upfront fees and no annual charges. There are deferred establishment fees for borrowers who pay out early.
 
QuickDirect gets its money from ING Bank. Carlisle says the deal is that he pays ING a wholesale rate and adds a margin.

The loan portfolio includes a low doc loan at 7.59 per cent with a maximum LVR of 80 per cent, fixed rates with terms up to five years, a no deposit option and an all-in-one package with credit, debit or cheque account options that is priced at 7.94 per cent.

Carlisle said: "For a long time my view has been that broker fees are too high. Last year I started to look at options for a business that would take those costs out."
 
Quick Direct initiates contact with the customer through the website and all subsequent contact is with sales and support staff in a call centre.

Carlisle said the way to overcome people's feeling that they need to negotiate their loan face to face was to offer a very high quality call centre service.

He presently employs seven consultants and is fielding between 200 and 400 applications a week. Loan processing is outsourced to Loan Services Australia.

"There are lots of things that can go wrong when you get into a mortgage. The secret to delivering a great customer experience is to eliminate the errors.

"We start by making it as simple as possible. No fees. Simple products. No campaigns or special deals.

"Our sales people all have experience in the mortgage market. We have hired people from contact centres at St George, Wizard and Rams."

Fujitsu Consulting's Martin North said there was potential for the online mortgage market to grow. "We would say that two per cent of mortgage origination is online in Australia at the moment.

"But our surveys tell us that 30 per cent of people go online to get information about home loans. And a third of that group would be interested in having an  online service.

"It is not the idea of buying online that puts them off. Online credit card and personal loan sales are  quite high.

"It is the poor quality of the service that is currently available online. The thing we have to develop here is simpler and faster application processes, along the lines of what GMAC is doing in the UK."