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Bluestone Mortgages has secured Australia's biggest lender, Commonwealth
Bank of Australia, as a new source of referrals it hopes could help generate up
to $600 million a year in mortgages regarded as high risk by the big banks.
Bluestone, one of several players that lend solely to borrowers who don't
meet bank lending criteria known as the non-conforming market will pay CBA a
commission for each referral, while the bank also hopes the deal will enable it
to maintain other banking relationships with these customers.
Bluestone's chief executive, Alistair Jeffery, said given the non-conforming
market was about 3 per cent of the overall mortgage market and CBA's annual home
lending was in the order of $20 billion, there was a market of up to $600
million that could be tapped.
``These loans are not being written at all," Mr Jeffery said. ``This is
incremental mortgage volume rather than taking market share from one lender to
another."
Non-conforming loans charge higher interest than standard loans, but suit
borrowers who lack a suitable credit history or can't meet some strict lending
criteria, such as having full-time employment.
Other non-conforming lenders include Liberty and Pepper.
As it stands, Bluestone mainly distributes its loans via mortgage brokers,
which offer the loan as part of a panel of mortgage options.
Only a small amount of CBA's loans are generated via brokers (via the
Colonial brand), with the vast bulk via its network of branches and mobile
bankers.
Bluestone already has similar relationships with BankWest, St George Bank and
Wizard.
Mr Jeffery said the CBA deal was not defined as exclusive, but he understood
Bluestone was the only non-conforming lender that CBA would make referrals to.
Mr Jeffery said Bluestone's market share stood at about 1per cent of the
total mortgage market, or around $1 billion a year in loans. While the
non-conforming market was now around 3 per cent of the market, trends in more
established markets such as the UK suggest this could grow to 4 to 6 cent, he
said.
CBA's executive general manager of retail customer services, Nick Kennett,
said there were invariably ``some borrowers" who did not meet the bank's
lending criteria and the bank would offer them access to Bluestone while
maintaining a core banking relationship.
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