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Published 13 November 2012 05:37, Updated 30 November 2012 04:57
YBR’s Mark Bouris says small business owners have always found it hard to get their hands on the mortgage discounts by the Big Four banks to other borrowers
Mark Bouris’ plan to attract small business borrowers to his upstart Yellow Brick Road brand could herald a new direction for backer Macquarie’ Group’s commercial arm.
Bouris announced last week that YBR had forged a funding alliance with Macquarie, boldly boasting of plans for a tilt at “fifth pillar” status in Australia’s banking industry, kick-started with a discounted mortgage offer.
But come 2013, Bouris will turn his sights on the small business sector, which he says has usually been dudded by the bigger mortgage lenders.
The banks “offer these ‘professional package’ discounts as a marketing tool to confuse the situation but the reality is these discounts are for the smaller part of their book,” he says.
“The base rate is there to protect revenue from the largest part.”
This “largest part” rump includes business owners, who don’t enjoy comparable discounts on the “low-doc” home loans they are often forced to take out.
“The problem today is small business people get a business loan secured against their home but pay a business premium – there’s absolutely no reason for that,” Bouris says.
“The quality of the security is the quality of the security. Often these guys in small business have been around a lot longer than people who have a job. You’ve run a business for 20 years yet you get penalised on your rate compared to someone who’s been in a job for one year.”
The tie-up with YBR shows Macquarie has recognised the need to reinvent its business model, the head of market analysis at banking research firm East & Partners, Lachlan Colquhoun, says.
“Macquarie’s commercial bank was an unsung hero while the investment bank was still doing well,” he says. “They could well morph into a business bank.”
As part of the discounted mortgage offer announced during Bouris’s media blitz, YBR’s 140 franchises will offer a 1.15 percentage point discount from a 6.65 per cent base rate in the first year of the loan. The discount drops to a permanent 0.86 percentage points after the first year.
But the permanent discount begs the question: Why quote a base rate in the first place?
“I’m trying to make a mockery of the game the big banks play with discounts,” Bouris says.
One certainty is that Bouris won’t be able to cut the big four’s banks’ net interest margins (NIMs) - the difference between income generated by their interest earning assets and interest paid to lenders such as depositors - as much as he helped do with Wizard in the early 1990s.
From a peak of 4.04 per cent in 1995, the major banks’ NIM sits at 2.16 per cent today.