3 min read | 22 Nov 2018
Homeloans Ltd will provide debt funding to Athena Home Loans and has joined Macquarie and Square Peg as a shareholder of the new lending platform, which is preparing to launch later this year with technology to link mortgage borrowers directly with super funds and non-bank lenders.
Athena, founded by two former National Australia Bank executives, is targeting $1 billion of lending in its first year, a drop in the ocean compared to the $1.7 trillion mortgage market.
However, the strategic partnership announced by ASX-listed Homeloans on Monday shows major banks, as they grapple with a loss of customer trust due to the banking royal commission, are under growing pressure from both new customer-facing home loan brands like Athena, and non-bank lenders seeking to improve their digital offerings.
Ahead of its full-year results due for release on Thursday, Homeloans said it will use the Athena platform “to further grow and enhance our offerings” and has also invested $2 million in equity in Athena, part of a $20 million raising also backed by Square Peg and Macquarie Capital, Rice Warner and Apex Capital.
Homeloans will also provide an undisclosed amount of debt funding to back’s Athena’s lending.
The deal could help Athena securitise mortgages should it scale successfully, given Homeloans’ subsidiary Resimac is the pioneer of the residential mortgage-backed securities (RMBS) market and has issued more than $21 billion in securitisation transactions.
Athena says its technology allows for conditional approval for a mortgage refinancing to be gained in as little as 15 minutes. It will launch a beta pilot later this year with full launch expected early in the new year.
Square Peg’s Paul Bassat sits on the board of Athena, which was co-founded by former NAB executives Nathan Walsh and Michael Starkey, who until 2016 sat on the board of Homeloans given NAB’s strategic investment in the group.
The fintech seeks to disintermediate banks’ stranglehold on mortgage lending, by linking superannuation funding with borrowers. It claims it will be able to offer borrowers lower rates than many banks given its low base and access to relatively cheap funding given the scale of the non-bank and super sectors, while also giving super investors access to the mortgages as an investment more directly than via their funding of RMBS.
“Trust in the banks has eroded, and we can provide better value,” Mr Walsh said. He said the platform would be useful for customers looking to switch and refinance their loans.
Homeloans joint CEO Scott McWilliam said the partnership with Athena would allow it “to fast track key elements of our digital transformation strategy focusing on delivering a quality experience for our customers”.
Homeloans listed on ASX in 2001 and merged with Resimac in 2016 to become one of the largest non-bank lenders, along side Liberty, Pepper and Firstmac. It has a market capitalisation of around $250 million. Its stock is up 20 per cent over the past three weeks.
Homeloans is planning on delivering its full-year results to the market on Thursday.
Originally published in The Australian Financial Review on August 20 2018 by James Eyers. (Please note that the AFR is behind a paywall).