AUSSIE HOME LOANS, A CASE STUDY OF STRATEGY
By Samantha Harper, Student Number 97093532
INTRODUCTION
“I saw the competition mortgage originators had provided the banks in the USA and I thought to myself. Australians have been taken for a ride long enough by the banks in this country, and it’s time to do something about it. Aussie home loans opened it’s doors in 1992. It’s purpose: to challenge traditional lenders and make home ownership more affordable. Today, Aussie is Australia's largest non-bank lender, offering a range of home loan solutions.” ( Symond 2003).
In this article we examine how John Symond was able to implement this vision in the years between 1992 and 1997. We consider the strategies used, the actions of his competitors and suggest strategies for the future.
BACKGROUND - A DIFFICULT MARKET TO ENTER?
Prior to 1982 the banks had been highly regulated. They were effectively protected from competition but interest rates for housing were capped and this made home loans unprofitable at times of high interest rates. In these situations the banks essentially rationed loans by placing all kinds of preconditions on any new loan. ( Robins 2003 ). It was a common complaint that the banks would never lend you money unless you were so rich that you didn’t need a loan anyway. In fact for many people the building societies were the only recourse although they were more expensive. At their peak they accounted for about 35% of the home loan market.
By about 1985 the finance sector was substantially deregulated and this allowed mortgage originators to appear. They raised wholesale funds by selling AAA rated mortgage backed securities to various financial institutions. This left them at a disadvantage. Th ...