THE Mark Bouris-backed Yellow Brick Road has signed a deal with Macquarie Group that will enable it to compete with the big four banks in the nation’s mortgage market.
Macquarie will fund mortgages through Yellow Brick Road’s 130-store retail network to offer ”aggressively priced” products to consumers.
Mr Bouris, the Yellow Brick Road chairman, said the deal would ”bring back choice, access and competition like there was in the 1990s.”
“Plenty of commentators, including politicians, talk about the need for competition,” he said.
“This is a game changer that will take the big four head on.”
Under the deal, Yellow Brick Road will try to undercut the big banks by offering a 1.15 percentage point discount on all new home loans for the first year of the loan. It will also offer a discount for the life of the loan.
The Credit Suisse analyst James Ellis said the deal was ”bread-and-butter” business for Macquarie, which had a similar contract with Aussie Home Loans 20 years ago. But he said the market had changed a lot.
“When Aussie Home Loans entered the market, mortgage spreads were hundreds of basis points over the cash rate,” he said. “In a few years, it had quite a seismic and important impact.
“I wouldn’t expect the same this time round because it’s just a fundamentally different market.”
Mr Bouris made his name setting up Wizard Home Loans in 1996, which he later sold to GE Money for $500 million.
A spokesman for the Treasurer, Wayne Swan, said the move showed competition was starting to heat up in the banking sector. ”The government is supporting smaller lenders to compete with the big banks so that Australians who aren’t happy with their bank can walk down the road and get a better deal,” he said.
Since 2007, the big banks have increased their mortgage rates by an average of 135 basis points compared with the cash rate. For credit unions and mutuals, the increase has been about 97 basis points.