Around 40 percent of all mortgage customers have fixed interest rates; Jarden estimates that $500 billion will have to be refinanced in the coming years. Tic:Toc founder Anthony Baum said this will come at a time when “funding through digital or broker offerings is easier than ever.”
Tic:Toc receives $500 million in mortgage funding applications per month, which is relatively flat, but a larger proportion is now being driven by refinancing, up 80 percent from 60 percent last year.
But similar to big banks, Tic:Toc’s credit criteria mean it can’t fund all of these applications. It currently funds around $200 million per month.
The partnership with AFG enables Tic:Toc to refer customers outside of its criteria to around 70 lenders in the AFG network. By capturing the application data, Tic:Toc’s brokerage service can simplify the application process with alternative lenders.
The introduction of fast, digital mortgages amid rising interest rates and expiring fixed-rate loans will structurally change the mortgage market by shortening the average life of home loans, Mr. Baum said.
Westpac announced last week it could approve some mortgage applications in 10 minutes, while in May the Commonwealth Bank launched Unloan, a self-service product that bypasses brokers, and said it would bring cheaper lending costs to customers pass on.
“The reality is all the opportunity for customers to take advantage of this in a very competitive market that is really going to see the first downward pressure on the average home loan life in a while,” said Mr. Baum.
“Broking will continue to evolve. Digital lending will continue to evolve. We want to work together [with AFG] to enable more automation in the industry.”
Aussie Home Loans uses mortgage processing technology developed by Tic:Toc for its digital home loan offering announced last year.
AFG expects the five-year average home loan maturity to decrease as it prepares for $11 billion in fixed-rate lending this year, $27 billion next year and 10 in 2024 billion dollars. This is expected to lead to further discussions with brokers.
“Customers will return to their broker after fixed interest rates expire, who are subject to the best rates and are therefore forced to search the customer,” Damian Percy, general manager of AFG Securities, AFG’s lending division.
“Refinancing is a particularly strong area. When clients visit agents, we see an increased commitment to improving their finances and reducing one of the biggest expenses in the household budget,” he said.
“Inquiries are increasing and as fixed rates unravel over the next 18 months we expect higher ongoing refinancing rates, making this partnership with Tic:Toc even more attractive as they have a different clientele in a different context than traditional brokerages. “
AFG CEO David Bailey said the aggregator will review Tic:Toc’s technology and consider adopting it.
“With our lending platform, we are very good at filtering lending products. Tic:Toc built the data collection and validation of this information. When we put these together, we can say to lenders, “Here’s a customer who’s been validated.”
“We can make your process smoother and achieve faster and more consistent execution.”
AFG, whose share price has risen by 27 percent in the past month, will publish its full-year results on August 26.
Tic:Toc said in February it would consider an IPO once $1.5 billion a month in mortgages “touches the platform,” depending on market conditions. Plans are to announce new distribution agreements in the coming months.