Shake up for home loans' market
Simon Stockley is anything but a financial sissy.
After paving the way in the mortgage securitisation market with SA Home Loans in the late 1990s, and later starting a mortgage company in Saudi Arabia, he is back - this time with a new home loan offering designed to take on the big four banks.
Standard Bank (JSE: SBK), Absa (JSE:ASA), Nedbank (JSE: NED) and FNB (JSE:FSR) enjoyed bumper profits along with the residential property boom this decade, with much money coming from home loans. SA Home Loans was a welcome competitor, but now has as a major shareholder Standard Bank
Stockley is introducing Integer, a mortgage product that includes transactional banking and credit facilities, to consumers.
He is aiming at new buyers as well as trying to tempt existing home owners to "switch" mortgages for a better deal.
Things have got a little tighter for potential property buyers in these days of rising interest rates, so some might argue Stockley's timing is a little off. Of course, current owners feeling the pinch may be tempted to explore their options with Integer.
Also not to be overlooked is that many property buyers are channelled to banks through originators who pay estate agents for business referrals - directly and indirectly. Stockley's new business will have to compete with this established and well-oiled system.
In addition, the offering will be securitised - or sold off in the debt market like bonds to asset managers - at a time when the whole world has got decidedly nervous about property finance amid the US sub-prime crisis.
Even Investec (JSE:INL) - an investor in Integer along with Purple Capital (JSE:PPE) - took a hammering amid the global housing market toil.
The game plan
An upbeat Stockley told Moneyweb's Realestateweb: "I think the opportunity exists for companies like ours. Banks inherently do it (home loan provision) badly. Our job is to get out there and do it better. There's a gap for a niche player."
Integer would be a "price proposition but also a service and retail experience".
It aims to give full credit approval, including valuing a property, within two days. Currently, applicants are generally waiting at least five to seven days and often much longer.
Of the securitisation approach, Stockley said: "We do not see the current US sub-prime meltdown as a problem for launch, but rather as an opportunity.
"Once the dust has settled, asset managers will once again be seeking quality mortgage assets to fund and we are targeting the very best underlying collateral," he said.
Stockley said Integer would start with a web presence and call centre, but was planning its own branded sales' force, along the lines of the SA Home Loans' model.
It has arrangements with some mortgage originators, mostly in the Finbond stable.
Among the areas Stockley believes Integer can beat the big banks are:
- A new technology platform build specially to cater for this type of product; and
- Its price proposition. Integer will compete on discounts below prime.
He is aware of the challenges, saying that the big four banks are "very cosy", controlling about 90% of the home loans' market through their "club".
While the National Credit Act (NCA) is proving troublesome for some banks to bed down, Integer has a system built specially taking into account the requirements of this new legislation, he said.
In addition, Integer plans to be "prudent" about credit granting, so the NCA is not seen as an obstacle.
Stockley said the product was a "one account concept", but that, unlike FNB's One Account, the system is designed to cope from an accounting perspective.
Moneyweb recently exposed problems with the FNB One Account, with the bank admitting to interest calculation errors.
The Integer CEO said it would also be possible for clients to run their home loan parallel to their other banking, so that they do not lose track of short-term spending and can pay off a home loan quickly.
Loans will be offered up to 85% of the home value and up to an amount of R2,5m. A credit facility of 1% of the home loan will be offered on a Visa debit card at the home loan rate, plus clients will receive free internet banking.
As with all new offerings, the proof will be in the pudding. Few, however, can argue that a shake-up on price and speed of service in the home loans' sector would be most welcome.
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Comments
I was wondering what sort of interest rate concessions they'd be offering. Let's be honest the only reason why I'd move is a proper saving in my back pocket. Currently I'm managing my access bond pro-actively, so my current account is an absolute minimum . .more
by Big Willy on October 02 2007, 12:49
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What's the number? I want a quote.
by happy camper on October 02 2007, 15:34
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Ran by Investec using ABSA branches. Just the same old bunch. Like Virgin Money was something new - Also just a rebranded ABSA card (Using ABSA call centres, systems etc.) A real shake up? Come on get real!
by Grumpy on October 03 2007, 08:31
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by More background details on the Saudi Arabia "mortgage product" please. Saudi is even more dominated by big banks than SA. Does not sound halal at all.... on October 02 2007, 17:48
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WITH SURPLUS LIQUIDITY IN THE SAUDI ARABIAN ECONOMY, RSA DEVELOPERS SHOULD FORM ALLIANCES WITH SAUDI BANKS TO ENTER THE RSA PROPERTY AND REAL ESTATE MARKET. CAUTION MUST BE OBSERVED IN THAT THE "SHARIA " BANKING SYSTEM IS A BANKING FUNDAMENTAL IN ISLAMIC . .more
by BAL RAM SOOKDEO on October 29 2007, 20:38
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valuations in two days..... off the book a drive by or a proper valuation by inspection?.
Property loans in a up market easier to manage than in a down market, securitization now very optimistic
by ea on October 03 2007, 21:21
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welcome back simon!
by anonymous on October 03 2007, 23:36
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MR SIMON STOCKLEY WELCOME BACK YOU WILL SHOW THE SOUTH AFRICAN
HOME LOANS INDUSTRY HOW IT IS DONE WE NEED MORE PEOPLE LIKE YOU GOD BLESS YOU,
GO GO GO SIMON
by PAULIE on May 20 2008, 09:34
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