27/08/2009 - 00:00

Aggregators push independence

27/08/2009 - 00:00

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A SPATE of transactions in the mortgage market has left Perth-based Australian Finance Group one of the few independent aggregators standing in what is now a big bank-dominated sector.

Aggregators push independence

A SPATE of transactions in the mortgage market has left Perth-based Australian Finance Group one of the few independent aggregators standing in what is now a big bank-dominated sector.

But a move by Melbourne-based aggregator Connective into the Perth market means AFG can't fly the independent flag alone.

AFG general manager of sales and operations, Mark Hewitt, said the group, which has a $55 billion loan book, expected to pick up some market share because of its ownership structure.

"We do believe we are the only independent left around," he said.

"There will be some brokers that will be uncomfortable dealing with [bank-owned] groups."

Institutions do have a stake in AFG, with Macquarie Group holding 10 per cent and Allianz and Tower controlling 5 per cent each. The remainder of the equity is held by current and former staff.

Aggregators provide technology, training and support services to brokers, and act as a conduit to lenders, who require minimum mortgage volumes. They differ from mortgage managers that generate their own funding.

The aggressive jostling by the big banks for control over the mortgage market has led to concerns that brokers will be persuaded to recommend bank loans.

Last year, Commonwealth Bank took a one-third stake in Aussie Home Loans, and through it eventually wound up with a share in Wizard Home Loans. Westpac bought the Rams brand and franchise network as the company went into freefall during the financial crisis.

National Australia Bank last week announced it would pay $385 million to buy Challenger Financial Services Group's mortgage management business, which included the Plan, Choice and Fast mortgage aggregator businesses.

Connective principal Murray Lees said the "Nabregator" purchase was a vote of confidence for the industry, and good for Connective because brokers would be attracted to its ownership structure.

"We're now the largest independently owned aggregator," Mr Lee said, discounting AFG on the grounds of its institutional stakeholders.

Mr Lees said brokers were fiercely independent.

Connective, with a $12 billion mortgage book, is now targeting the Perth market after creating a network of about 1,000 brokers predominantly based in the eastern states.

But institutionally owned groups are still flying the independent flag.

Anne-Marie Syme, the co-founder of Osborne Park-based Fast, said Nab agreed to operate a silo system, leaving Fast to operate independent of its bank owner.

"We will remain completely independent," she said.

Martin North, executive director, industry for consultancy Fujitsu Australia and New Zealand, said it was possible for bank-owned groups to operate independently, although ultimately only time would tell whether banks were happy to effectively recommend competitor loans.

"I do believe the core strategy for most of the organisations is to keep a portfolio of brands," Mr North said.

"There's been a very significant reorientation in the market. That doesn't mean competition has necessarily got less; it means it has changed. The banks are at each other's throats to compete against each other."

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