Macquarie’s market share propelled by turnaround times

Appearing before the House of Representatives standing committee on economics, the head of Macquarie Group’s Banking and Financial Services (BFS) division, Greg Ward, was asked to identify the bank’s “competitive advantage” in the home lending space.

In response, Mr Ward pointed to the bank’s processing times, which was identified as a key area for growth by internal research conducted by the bank.  

“[We’ve] done what we call ‘customer empathy’ interviews with mortgage clients and mortgage brokers [and] we think that one of the most important things we heard there was the speed of turnaround in an approval,” he said.

“[If] you’re wanting to go to an auction or bid on a house, or you’re wanting to finance a house that you’re buying, or you’re a mortgage broker and you’ve got a client who’s come to you and wants to get a mortgage, they’re looking for certainty that they’re going to be approved on that mortgage as quickly as they possibly can.”

Mr Ward revealed that after investing in improving its mortgage business, Macquarie's turnaround times far outpaced the market average.

“The average turnaround times in the industry, when we looked at this, was 25 days for formal approval on a mortgage – that uncertainty was extraordinary for customers and mortgage brokers,” he said.

“We invested $300 million in a core banking system and a mortgage origination platform to help us turn that approval around much quicker. 

“For a lot of our customers, formal approval happens within three to five days. It may happen on occasion if they have a complete application with all the relevant information that were required, [approval] can sometimes happen on the same day.”

According to Mr Ward, borrowers are willing to incur higher interest rates on their home loan for faster turnaround times.  

“What we’re told from customers, and we saw this from our empathy interviews, ‘I would rather pay a little bit more for the certainty and speed of turnaround than wait and not know’,” he said.

Mr Ward told the committee that based on Macquarie’s research, borrowers would be willing to pay up to 10 bps more for a home loan product for timely approval.

“We find if your equivalent product is more than 10 bps more expensive than a bunch of other providers, then the customer is starting to think, ‘Maybe I should shop around’,” Mr Ward continued.

Mr Ward revealed that Macquarie has experienced a sharp increase in its share of new mortgages settled in Australia as a result of efficiency improvements in its home loan application processes and discount rates offered to low-LVR borrowers.  

“Our current share of the mortgage market is 2.3 per cent, but our share of current flow of new business [from the broker channel] is about 12 per cent, so we are growing very fast, and I think it’s that we are the best in market in terms of turnaround times for a mortgage approval,” he said.

Growth in Macquarie’s market share is reflected in the bank’s half-year results for the 2020 financial year (HY20), in which the BFS division reported 21 per cent growth in the bank’s Australian mortgage portfolio, which grew from $36.1 billion in 1H19 to $43.6 billion.

According to Macquarie, its mortgage growth was driven by “strong demand” in lower loan-to-value ratio (LVR) and owner-occupier lending channels.

Macquarie has also continued to gain popularity in the broker space, as revealed in the Australian Finance Group’s (AFG) mortgage and competition index for the September quarter, which is based off data collected by the aggregator’s network of 3,000 brokers.

According to the index, Macquarie’s share of the broker space increased from 9.7 per cent as at 30 June to 11.4 per cent in the three months to 30 September.

The bank’s broker market share has more than doubled over the 12 months to 30 September, from 4.6 per cent, and is ranked second overall (when excluding subsidiaries), behind only the Commonwealth Bank.

[Related: Macquarie reports 21% mortgage book growth]