Yellow Brick Road sees no slowdown in investor lending
PUBLISHED: 16 HOURS 30 MINUTES AGO | UPDATE: 16 HOURS 30 MINUTES AGO
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Mark Bouris, executive chairman of Yellow Brick Road, says he has seen no pull-back on investor loans. Fairfax Media Australia -
SHAUN DRUMMOND
Yellow Brick Road executive chairman Mark Bouris says he has seen no slowdown in investor lending by the banks that back his businesses since regulators said in December they would scrutinise growth of investor loans beyond 10 per cent.
YBR's half-year gross profit of $11.9 million almost doubled because of the acquisitions of mortgage aggregator Vow Financial and mortgage manager Resi and double-digit lending growth.
It posted a net loss after tax of $4.2 million, but Mr Bouris said it was still on track to break even by the end of June.
YBR's total loan book is now more than $27 billion and it commands about 4 per cent of the total mortgage market, more than any of the regional banks, Mr Bouris said.
Mortgage settlements are up 55 per cent compared with total household loan settlement growth of 14 per cent. It now has about 700 branches in its network.
About 40 per cent of YBR's loans are to investors, which is above the industry average. It is not regulated by the Australian Prudential Regulation Authority, but the banks that support its loans – Macquarie, NAB and Bendigo and Adelaide Bank –are.
"Vow is heavily structured towards investors because brokers just generally chase investors, whereas Resi is the other way –it is heavily towards refinancing and owner occupiers," he said. "We have a good balance. We're not experiencing any more investor loans now than Vow experienced two or three years ago."
Macquarie Bank has a small proportion of the total mortgage market, but by far the fastest growth in investor loans. NAB's investor loan book grew at about 12 per cent in 2014. Bendigo's investor loans fell. Mr Bouris said he doesn't know what APRA has said to these institutions, but said regulators are more concerned about risky lending to that sector.
While demand from investors is there and the banks have the appetite to accept them, he said his businesses would write the loans. "We have seen no notification to reduce loans to investors," he said.
The Australian Securities and Investments Commission is also targeting interest-only loans, which mostly go to investors. APRA has said it wants a minimum loan servicing level of 7 per cent. This is well above present rates of less than 5 per cent, but regulators want to ensure borrowers can still pay the loans when rates rise.
As well as the three banks, the expanded YBR group now also has so-called non-conforming loans from Pepper Home Loans.
Mr Bouris said YBR was now enabling Resi to offer its own loans to brokers via its brands, with funding coming from NAB, Bendigo and Pepper. "We have this wholesaling ability that we never had before, which increases our volumes and so the economics is better for us."
The company has also started lending to larger businesses. Mr Bouris said all lenders are turning to business loans as margins get squeezed in mortgages.
"They have to, because in the mortgage market, they are just mauling each other, the margin is getting squeezed and we like to think we have contributed to that."
The Australian Financial Review
YBR Price at posting:
59.0¢ Sentiment: Buy Disclosure: Held
