Interview with a CEO: Andrew Walker, Nano Home Loans

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on December 06, 2021 Fact Checked
Interview with a CEO: Andrew Walker, Nano Home Loans

Savings.com.au spoke with Andrew Walker, CEO of Nano Home Loans - a digital lender looking to shake up the Australian mortgage market.

You can’t interview anyone in personal finance these days without talking about house prices and the mortgage market. Mr Walker shared his insights on these hot topics as the co-founder and CEO of a lender that can approve a mortgage application in as little as 10 minutes.

Topics covered include:


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Buying a home or looking to refinance? The table below features home loans with some of the lowest interest rates on the market for owner occupiers.

Lender
Advertised rate Comparison rate* Monthly repayment Rate TypeOffsetRedrawOngoing FeeUpfront FeesLVRLump Sum RepaymentAdditional RepaymentsPre-approval

VariableMore details
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
LIMITED TIME OFFER

Smart Booster Home Loan Discounted Variable - 2yr (LVR < 80%)

  • Fast turnaround times, can meet 30-day settlement
  • For purchase and refinance, min 20% deposit
  • No ongoing or monthly fees, add offset for 0.10%
VariableMore details
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
100% FULL OFFSET ACCOUNTNO APPLICATION FEE OR ONGOING FEES

Low Rate Home Loan - Prime (Principal and Interest) (Owner Occupied) (LVR < 60%)

  • No upfront or ongoing fees
  • 100% full offset account
  • Extra repayments + redraw services
FixedMore details
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
USE A MARKET LEADING APP TO HELP YOU PAY OFF YOUR LOAN SOONER

Fixed Home Loan 1 year (Principal and Interest) (LVR < 80%)

  • Make up to $20,000 additional repayments per fixed term
  • Redraw available – lets you access any extra loan repayments you’ve made
  • Choose to rate lock for 90 days (fee applies)
VariableMore details
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
REFINANCE IN MINUTES, NOT WEEKS

Nano Home Loans Variable Owner Occupied, Principal and Interest (Refinance Only)

  • No application or ongoing fees.
  • 100% free offset sub account.
  • Fast online application, approval in minutes not weeks.
  • Mobile app, Visa debit card, Apple and Google Pay
  • Refinance loans and variable rates only.
VariableMore details
ZERO APPLICATION FEES

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees
ZERO APPLICATION FEES

Owner Occupier Accelerates - Celebrate (LVR < 60%) (Principal and Interest)

  • We lower your rate based off how much you’ve paid down your loan
  • Automatic rate match
  • No upfront or ongoing fees

Rates correct as of January 17, 2022. View disclaimer.

Q&A - Andrew Walker, CEO Nano Home Loans

Responses and questions may have been edited for length and/or clarity.

Harrison: All the talk recently in the media and even at backyard barbecues has been house prices. Where are they going? Have we reached the peak? We've been in two minds about it at Savings.com.au. But in your opinion, where's that heading?

Andrew: I think the rate of growth will slow is my opinion on housing prices. And we may see a short term correction.

Bearing in mind you've got to look through the short term trends and think about what the long term trends are, and more importantly, what the drivers are of house prices.

If you take those one step at a time, you ask yourself basic economic questions of supply and demand, right?

Then you ask yourself the macro questions about desirability of a country. If you just take those in turn … do we have enough housing supply for the demand that's out there? And the answer is no. We know that we've got a shortage of housing supply. And when you've got a shortage of supply price goes up.

We've had a short term blip in terms of demand, because we've had a whole lot of Australians that hadn't been able to get back into the country. And immigration has slowed in the last two years. But no, that hasn't slowed property prices down. There was at the very start of COVID, yet a whole lot of Australians returning, so a little blip in demand.

Moving forward, as the borders open, you're going to see more and more people wanting to move to Australia; you're going to see a shortage of housing.

And so supply/demand suggests that the past prices will maybe correct a little bit as the market might be a bit overheated, but ultimately, we'll continue on an upward trend.

H: What are some headwinds you see in the market, apart from supply issues? There's been a lot of talk recently about the APRA serviceability buffer bump and the RBA potentially increasing the cash rate before 2024. Do you see these as headwinds in the market?

A: Those are the factors that have the potential to slow the market down, I think. And that's ultimately what the Reserve Bank will be trying to do, right?

The RBA - as much as everyone likes to think that they’re the killers of the party - are not really trying to kill the party. They just want to keep going at a slower rate for longer. [That’s] probably the best way to describe them.

Ultimately, property, like a lot of long term holding assets, appreciates intergenerationally in value, right? So the long run trend runs for generations, not years - it runs for decades and centuries. Every so often it grows a little too quickly, but it will regress to the average mean of the asset appreciation of their class. And that's ultimately what the Reserve Bank will try to do.

H: Moving slightly now to the home loan space. So we'll talk about fixed rates for a second, they've generally been going up in recent months. What has Nano's experience been with that?

A: We don't have a fixed rate product. The fixed rate product is typically reserved for larger players, the banks that have got balance sheets where they can manage and spread risk, and swap contracts.

There has been an enormous swing in this marketplace, which has been predominantly variable into fixed rates over the last two years.

That swing has come in large part because what happened is the main lenders here weaponised the TFF [term funding facility] that the regulators put in place where they gave them a $200 billion free line of credit, ostensibly.

What happened was that the mainstream banks didn't transfer that wealth to the population at large - they kept it for themselves and used it to try to attract new customers. They turned that into a weaponised market share.

A lot of people were attracted by a much lower rate than they'd seen in fixed rates before. And it was actually a super profitable product for the banks that had access to that TFF. Ultimately, it wasn't even like paying a deposit rate and then putting a spread on it and leaving it - the TFF was ostensibly free. It was free money that they could lend out for ultimately an infinite margin.

That swing then to fixed rates is now going to, over the next two or three years, reverse out because the TFF was for a maximum of three years. And so all of those borrowers that are in those facilities will now roll out.

The thing that they need to watch is as they roll out of those fixed rate facilities that they don't get caught in the trap… of rolling out into a variable product. That variable product will be really expensive, will have a whole lot of hidden fees, and underlying charges.

People ultimately forget that happens until it's too late. They realise they are paying over the odds for a period of time. So that's a trap for the viewers to watch.

H: The TFF has been one interest point of mine over the last year or so. We've had a number of non bank lenders' executives say it was not fair - their market share went back to the big four banks in particular. I think CBA drew down $50 billion, or something like that, which is simply massive.

So, how can non bank lenders, smaller lenders, compete when the Reserve Bank was providing cheap funding for these bigger institutions?

A: Well, you can't. From a funding perspective, you can't compete if someone gives you free money, then you can lend that out - it’s an anti competitive move. The answer is you can't compete with that.

Ultimately, all you can do, which is what we did, is you continue to offer great service, you continue to stand for financial fairness, no fees, no hidden charges, you offer a great rate, and a great variable rate.

A lot of people have come to our business because of principles that we've got in the services that we offer. If you're economically rational, or were economically rational, and that's all you cared about, then it was entirely suitable to take advantage of the TFF and the fixed rates the banks put in place.

That's what happens in a pandemic - you get these economic externalities, and people should take advantage of them.

What gets interesting here, moving forward, is when you don't have those abnormal interventions in the marketplace, everything gets down to a normal competitive playing field. What happens is, people will choose the lender that fits with the value set that gives them good value, good service, transparency and fairness. And that's how this will play out.

H: Pivoting away slightly now. We'll talk about home loan approval times. So there's been a few banks recently, I won't name them, that have been raked over the coals in the media about having really slow home loan application times.

What causes this - why are some lenders faster than others? And why are some really slow? And where does Nano fit into this?

A: We've got the world's fastest mortgage product - an unconditionally approved loan in sub 10 minutes. So that's not application, but to approval. We believe [this is] the best customer experience globally right now. And that's something we're quite proud of having built - speed.

Speed is a proxy for unit economics and customer experience. If you can approve a loan in 10 minutes, that's great. You can approve a loan in half an hour or an hour - that's fine, too.

The real battleground here, moving forward, is going to be the people that can't compete with a new service standard or being able to get a loan approved in 24 hours or less - that's really the new battleground.

Certainly over the next 18 months to two years globally, that's where all the competition's going to be. There's no reason, if you have built a process with better technology and thought about it differently, why you can't do that. That's the core of our business.

So, why do some leaders take a lot longer? You have to take a trip down memory lane really to understand this.

The mainstream banks are all sitting on Tandem mainframes that they bought in the 80s; they're sitting on an outdated back end system of record - really unstable, and unscalable. But they haven't updated for 30 to 40 years, the processes are the same, the products are the same.

[Editor's Note: Tandem Computers was a manufacturer of computer systems for ATMs and banks founded in 1974, acquired by Compaq in 1997]

When they onboard a mortgage, they do it all sequentially. As I said, the process hasn’t changed for decades and decades and decades. You end up with this hyper-inefficiency. The only way that you can improve the system, or the time to 'yes', is by either completely upgrading the system or starting from scratch. And that's very, very expensive.

That's a multi billion dollar spin for banks, and banks are profit machines. They need to distribute dividends to the shareholders. They typically don't do that [upgrade the system] - they push the problem forward.

Then your processes - you throw people at it. You try to automate a little bit as you can. And then you throw people at the problem, and you try to take a few days out of the equation. But most of the mainstream lenders actually tell you the industry average is 22 days' time to approval … as opposed to hours, 30 to 60 minutes, or 10 minutes as we've seen.

There's a fundamental difference, right? The difference there is you actually need to start with new technology, a different approach - you need to use digital expertise, you need to be an algorithmic lender. And you need to do that in a hyper-efficient way.

Here's the point: You can't do that incrementally. You can't take what you've got, and make it slightly better. You need to throw that out and start from scratch.

What you'll see both with ourselves and others globally that are in the space, [major banks] trying to catch up to where we are - that's what they're doing.

People are innovating because they're starting from scratch and reimagining what it should look like.

ENDS


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Disclaimers

The entire market was not considered in selecting the above products. Rather, a cut-down portion of the market has been considered. Some providers' products may not be available in all states. To be considered, the product and rate must be clearly published on the product provider's web site. Savings.com.au, yourmortgage.com.au, yourinvestmentpropertymag.com.au, and Performance Drive are part of the Savings Media group. In the interests of full disclosure, the Savings Media Group are associated with the Firstmac Group. To read about how Savings Media Group manages potential conflicts of interest, along with how we get paid, please visit the web site links at the bottom of this page.

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Harrison is Savings.com.au's Assistant Editor. Prior to joining Savings in January 2020, he worked for some of Australia's largest comparison sites and media organisations. With a keen interest in the economy, housing policy, and personal finance, Harrison is passionate about breaking down complex financial topics for the everyday consumer.

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