Online-only home loans remain a tiny fraction of overall market, but generational changes are underway
Commonwealth Bank’s digital home loan channel has become the fastest-growing mortgage application channel at the banking giant.
According to CBA, this is a reflection of shift borrower trends among younger customers who are willing to start their home buying journey online.
Borrowers in their 20s represent the fastest-growing cohort, while customers in their thirties make up the largest share of applicants. Older customers in their 50s are also turning more to digital mortgage products, CBA noted.
“We’ve seen strong growth in the digital channel because customers want more flexibility over how they start the process,” said CBA’s executive general manager of home buying Marcos Meneguzzi. “As Australia’s largest lender, we can see this trend across all types of customers. People are blending digital and personal support to get the experience that suits them best.”
Meneguzzi added that the shift is not necessarily to the detriment of the larger proprietary and third part channels.
“Traditionally, first home buyers have preferred a face-to-face experience, but that’s starting to change.
“Just as they’re comfortable researching and shopping online for everyday purchases, they’re now applying the same habits to bigger decisions like buying a home.
“This isn’t about moving away from our existing channels – it’s about providing choice and additional support through lenders once an application is submitted.
“Some customers prefer to begin online, others want to talk in person. What matters is that they can choose what works best for them.”
Big Four questioned on digital mortgages strategy
Brokers have expressed concern that major banks like CBA, Westpac, ANZ and NAB are increasing their investments in digital home loan channels to the detriment of the broker channel.
Jim Psirakis, principal and finance broker at Pegasus Home Loans, raised the issue at MPA’s latest major banks roundtable, which featured representatives from all major banks, including Macquarie Bank.
The responses largely reiterated that the customer experience must come first – although digital mortgages only make up a slither of these experiences for now.
Baber Zaka, general manager of third party banking at CBA, said he doesn’t see digital loan investment as detrimental to brokers.
“They’re two very different product and service propositions for very distinct customer bases,” said Zaka. “The customer who wants to go and get advice and actually have a relationship that’s more than just foundational with a broker, that’s multi-years or the whole life cycle, is not the same customer that would be comfortable with going through a digital channel.”
Ben Magnus, head of strategic partnerships, retail broker, ANZ added that “we want to ensure that we serve and support customers irrespective of the channel they choose to engage. We need to be clear on process and systems to be able to do that and ensure the proposition offered meets the needs of customers and brokers. It doesn’t impact or challenge the direct investment of the broker because we’ll go where the customer tells us to”.
Under chief executive Nuno Matos, ANZ has positioned its ANZ Plus digital mortgage product as a cornerstone of its strategy to wrest back market share from its Big Four counterparts.
“ANZ Plus is a fantastic technology... but we have to get there faster, in a different sequence, and with a different delivery model,” Matos said in October. “We want to put eight million customers on the same platform in Australia so they see us as one bank, one brand, one team.”
Magnus drew attention to customers’ overwhelming preference for working with brokers. “As we know, over 76% of customers choose to use a broker – that’s over 65% for ANZ from a flow perspective – so we’ll continue to be sharp and invest in our broker channel,” he said.
As it stands, digital mortgages account for just 5% of the home lending market.
“For now it’s not a sizeable market,” said Adam Brown, executive, broker distribution at NAB, although that could change down the line. “I go back to my comment around being where the customer wants to be. If the customer wants to be digital at some point in the future, as a major bank you want to be there, sure. But it’s not growing, it hasn’t grown, so we’re not there at this point.”
