REA boss explains mortgage strategy

EXCLUSIVE REA Group chief executive Tracey Fellows has outlined how the $8.7-billion company will build a national mortgage business with a big four bank and two major brokerages.

REA Group, the parent company of online listings giant Realestate.com.au, this week made two major announcements: the acquisition of Smartline and the establishment of a new mortgage broking service with NAB and Choice Home Loans.

REA’s decision to sign a “new strategic mortgage broking partnership” with the major bank builds on their existing relationship, announced in December last year, which will see REA offer NAB-funded white-label home loans.

“We are deepening that partnership to have a broker relationship,” REA Group chief executive Tracey Fellows told Mortgage Business. “As we see consumers coming onto our site and wanting information about more home loan offerings they can absolutely buy one of the NAB products or one of the REA Group products,” Ms Fellows said, confirming that an REA branded home loan will hit the market in the second half of this calendar year.

However, the REA loan will not be available to the entire third-party channel. Brokers with Choice Home Loans, which is owned by NAB, will be given the option to join the “new entity” created by REA and NAB and access the white-label mortgage. They will also benefit from the significant lead generation capabilities of realestate.com.au.

“Choice Home Loans brokers have been offered the opportunity to join this innovative new business with further opportunity for Choice brokers,” Choice CEO Stephen Moore said. “We expect the new strategic partnership will appeal to brokers who want to be part of a business with digital expertise and high brand awareness,” he said.

“Choice Home Loans will be transformed into realestate.com.au Home Loans. Choice Aggregation Services (CAS) will continue to provide support services to all brokers in the new strategic partnership. For brokers it’s really the best of both worlds, with the continued expert support of Choice and market leading brand and digital expertise,” Mr Moore said.

“Potential home buyers using realestate.com.au Home Loans will have access to the same panel of lenders currently available through Choice Home Loans.”

In addition to the NAB deal, REA will pay $67 million for an 80 per cent stake in major brokerage Smartline. While this will give Smartline brokers access to the REA home loan, it will also give customers access to other financial institutions.

It is understood that Smartline and Choice Home Loans will operate as separate divisions of REA Group in the immediate future.

“We wanted customers to be able to talk to somebody who is independent,” Ms Fellows said. “The reason why the broker network has continued to grow in this country is because Australians value that advice, that neutral perspective in helping them find the right home loan for them. We wanted that and we wanted consumers to have full choice.”

Ms Fellows said the Smartline branding will remain unchanged “for a period of time”.

“We will assess that over time,” she said. “It is certainly a well-known brand, well-established, well regarded and well respected. We are happy with that. They will have access to the REA home loan as well.”

In addition to purchasing a national distribution network of more than 300 brokers, Ms Fellows highlighted that Smartline’s $25 billion loan book was a key acquisition for REA Group.

The Smartline play is strategically important and of “a much bigger scale than what we have with NAB”, Ms Fellows said. “It gives us scale across Australia, which was very important for us.”

Meanwhile, Choice’s Stephen Moore confirmed that brokers will continue to be paid under a commission model.

“We believe commissions are a fair and equitable way of remunerating brokers,” he said.

[Related: REA to acquire major brokerage]

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