The following article is from today's Sydney Morning Herald, discussing Mark Bouris partnering with Macquarie Group to take on the Big Four Australian banks in the residential mortgage market. Bouris made his name in setting up Wizard Home Loans in 1996 which he then sold to GE. This will also place market pressure on Mortgage Choice as an Australian residential mortgage provider.
By Georgia Wilkins
THE Mark Bouris-backed Yellow Brick Road has signed off on a deal with Macquarie Group that will see it competing with the big four banks in the nation's mortgage market.
The venture will see Macquarie fund mortgages through Yellow Brick Road's 130-store retail network, to offer ''aggressively priced'' mortgage products.
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 12 months of the loan. It will also offer discounts for the life of the loan. Credit Suisse analyst James Ellis said the deal was ''bread and butter'' business for Macquarie, which orchestrated a similar contract with Aussie home loans 20 years ago.
But he said the market had changed considerably.
''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 Treasurer Wayne Swan said the move showed competition was starting to heat up in the banking sector following a range of reforms last year.
''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,'' the spokesman said.
Since 2007, the big banks have increased their mortgage rates by an average of about 135 basis points compared with the cash rate. For credit unions and mutuals, the increase has been about 97 basis points relative to the cash rate.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.