Lessons for banks in CBA’s rising home-loan share

After a period of decline, the nation's biggest home lender, the Commonwealth Bank, is again increasing its home loan market share, due mainly to its use of the broker network to reach new borrowers.

The CBA’s share of new lending was 15.1% during the past three months compared with 11.2% during the last twelve months. St George Bank is also performing well with figures showing lending rising by 0.6% in February , double January’s 0.3%, mainly due to an aggressive marketing campaign and more competitively-priced loan products.

This significant gain has been at the expense of ANZ, suffering due to service problems in its broker-originated lending division. ANZ’s rate of lending growth almost halved in February to 0.5% , from 0.9% January and from 1.4% in December 2000. ANZ’s problems stem ironically from the inability to service broker-generated business. It seems that the banks' systems just cannot handle the volume of applications coming through.

There is no doubt that broker networks are the way of the future for most lenders. For example broker-generated loan applications account for 20-30 per cent of new lending for the CBA alone. The ANZ situation however emphasises the importance of having systems in place to handle the volume, as this can have a great impact in consumer confidence. It seems that in the respect the CBA have ‘got it right’ and are now seeing the fruits of their labour.

It also highlights consumer attitudes to borrowing from the big banks. Increasing numbers of borrowers now value the dealing with bank via a broker rather than going direct to the local bank manager. Borrowers seem to be much more open than ever before to purchasing a product from a bank because, in not dealing with it directly, they avoid the less than impressive service sometimes experienced and are presented with more choices in a more relaxed environment. It is quite possible that one day soon this will be the preferred way of obtaining a mortage, and visiting the local bank branch will be a thing of the past.

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