Article in the Australian Financial Review on Loan Market’s move into rural finance.
The White family’s Loan Market property brokering business is heading to the bush, setting up a rural loan broking business that hopes to break the “blind trust” of farmers with their banks.
Loan Market, which has 700 brokers and settled $8.5 billion in loans in Australia over fiscal 2017, has appointed Martin Pentecost to head the rural expansion.
“Farmer’s loyalty is costing them,” Mr Pentecost said. “We want to upset the status quo where some farmers are borrowing at over 6 per cent when they shouldn’t be.”
While more than 50 per cent of Australia’s residential market borrowers use a mortgage broker to organise and refinance mortgages, farmers are largely relying on loyalty to their private bankers with many families using the same bank for generations.
The cost of this is often many tens of thousands of dollars annually in interest repayments.
“It is blind loyalty,” Mr Pentecost said.
Mr Pentecost said that with the rate of deals he is doing – especially for farmers looking to buy more rural property – the new rural broking arm could seal at least $200 million in loans by the end of next year.
Mr Pentecost will initially target areas such as Bathurst, Yass and Tamworth in NSW where Ray White has a strong rural network as well as Emerald and Rockhampton in central Queensland where there have been some issues with banks.
“Many banks are closing branches and really the banks’ level of service has been dropping in the regional areas.”
Graziers Tom and Ruth Wagner of “Nuga Nuga” near Taroom, north of Roma in Queensland, were with a second tier bank for several years.
They weren’t looking to change but mentioned to their accountant that they thought a better deal was available. Mr Pentecost was able to reduce the cost of their loan for them.
“What our broker [Marty] did was put our business out there and get the best deal. He has a rapport with the banks so he’s able to find better rates,” Ruth Wagner said. “We ended up with a lower interest rate. It was about a per cent difference and with that we were able to reallocate those savings into farm improvements and productivity.”
Loan Market director Peter Camphin said the move into the rural market had been a long time coming.
“Many farmers have had the same property in their family for generations and many have been dealing with the same bank for generations,” Mr Camphin said.
“Often we find that because of this they are not given the preferential treatment, particularly on the cost of funds that you’d expect. Many farmers are proud to announce to you, that in regard to financing arrangements they have a ;private banker’. My reply to this statement is ‘who does this private banker work for?’ Well, the bank of course. Our ‘private banker’ works for us as well, but he/she has 37 banks to deal with …”