Lenders are getting serious about offering home loans through digital channels and Bendigo and Adelaide Bank is among those leading the charge.
Bendigo and Adelaide chief executive Marnie Baker reported at the bank’s December half results briefing yesterday that 8.9 per cent of the bank’s mortgage settlements came through digital channels, including Bendigo Bank’s BEN Express, subsidiary Up and Tic:Toc.
Taking third-party funding arrangements into account, Bendigo and Adelaide claims to have 25 per cent of the of the digital mortgage market in Australia.
Baker said Up Home was launched in beta in July last year, when it was offered to existing customers without any external marketing. It has a A$38 million book, which is expected to grow strongly.
Bendigo Bank’s BEN Express book grew 52 per cent in the December half to over $100 million. Tic:Toc’s book is $2.9 billion.
Baker said digital mortgages offer a number of benefits. They help the bank reach different market segments – importantly, young people.
They reduce the cost of originating loans by automating processes and bypassing brokers. As brokers’ dominance in mortgage distribution (now over 70 per cent) grows, there is an inevitable backlash.
Bendigo and Adelaide increased its margin during the half but it only achieved this by “selectively” competing in the home loan market and giving up some market share.
The margin of 1.88 per cent was up from 1.8 per cent in the December half 2021 and up from 1.69 per cent in the June half last year.
The home loan book grew 6.4 per cent year-on-year to $57.5 billion but half-on-half it was down 0.1 per cent.
Baker said the bank’s strategy was to grow its mortgage book at system but in the current market it was being selective.
She said pricing is very aggressive, especially in the refinance segment, where lenders are offering generous cashbacks to win business.
Changing the channel mix, through its digital push, is one way the bank is looking to find gaps in the market where pricing is less competitive and costs lower.
Credit quality improved during the December half, with 90-day arrears on home loans falling from 53 basis points in the December half 2021 to 49 bps in the June half last year and 41 bps in the December half.
Forty-three per cent of home loan borrowers are in advance of their repayments by a year or more. Sixteen per cent have no buffer.