- Digital challenger moves from ‘priority’ customers to public offer for home loan refinancing
- Drops variable rate to under 2% p.a.
- Sets the benchmark with sub 10 minutes unconditional approval
- Aims to lead the $100 billion annual digital home loan market opportunity in the next 3-5 years
SYDNEY, AUSTRALIA, 30 June, 2021 — Following a successful soft launch phase, Australia’s first truly end-to-end digital home loan lender Nano has officially announced its public launch, offering a new competitive rate to the thousands of Australians looking to refinance their mortgages.
Nano is dropping variable rates for all existing customers as well as new customers for its owner occupier loans (principal and interest) to 1.99% per annum from 2.19% per annum, and investor loans (principal and interest) to 2.29% per annum from 2.49% per annum. The move comes at a time when many mainstream lenders have bumped up mortgage rates since March in the expectation that the Reserve Bank of Australia is expected to increase its official cash rate in 2022, despite the RBA still signalling no rate change until 2024.
The refinancing offer is the first step in building out its suite of home loan offerings – as Nano prepares to launch its platform for new home purchases in the second half of 2021. The company has received a phenomenal response during its soft launch phase with $30 million worth of refinancing loans approved to ‘priority access’ customers keen to experience a better way to borrow.
No loyalty tax, no hidden fees
Co-founder and CEO of Nano, Andrew Walker, said Nano’s fully digital model brings fairness by cutting out the ‘loyalty tax’ consumers are paying to big banks whereby discounts are offered to new customers while existing customers pay more.
“Nano’s policy is to always offer the same low rate for new and existing customers. We don’t believe in penalising our customers with a loyalty tax. We encourage borrowers who have been caught by hidden fees, loyalty tax and bad service to refinance with an institution that believes in fairness and transparency. 2
Mr Walker said major markets such as the US had shown price competition will quickly become “only half the story” in Australia, as consumers became accustomed to a radically different borrowing experience.
“Australians will always want a fair price but those are table stakes in today’s environment. They also want speed, convenience and certainty when going through what has traditionally been a stressful process.
“Our technology-led proposition puts customers first and our disruptive digital platform allows people to secure a home loan in minutes, not weeks – that means completing the entire loan process through to approval, not just filling in an ‘online application’ which then kicks off a traditional manual approval process,” he added.
Positioned for growth: A$100 billion p.a. market opportunity
Taking the lead from his US counterparts where more than 30% of mortgages are now digital, Mr Walker estimates the market opportunity for Nano will grow to $100 billion a year.
“The value of net new flows in the Australian home loan market roughly stands at $340 billion a year. In a market characterised by unprecedented digital disruption, it’s not difficult to see Australia following other markets with 30% of the market being digital in 3-5 years. That’s potentially a $100 billion addressable market opportunity for Nano,” he added.
After securing A$33 million in Series A funding from NZ-based Bolton Equities in April 2020 followed by an Australian Credit License in July 2020, Nano soft launched to friends and family in December 2020 and started allowing customers to sign up to get Priority Access to refinance in Australia from April 2021.
Last month Nano broke the ten-minute mark, approving a home loan in 9 minutes and 41 seconds from commencement of application to unconditional approval.
Nano’s real-time processing assesses property valuations, credit history, serviceability and identity in parallel, allowing Nano to substantially reduce origination costs, passing this cost benefit directly back to the customer.
Full banking replacement vs ‘digital lipstick’
In a recent Evans & Partners report on the Banking sector, analyst Matthew Wilson emphasised the digital battleground in home loans, citing the traditional banks’ response to disruption as ‘digital lipstick’.
“Banks used to defend their offerings and excess returns with a bundled package of products (home loan, card, insurance, deposit, payments, wealth and advice) combined with a vast distribution network (bricks & mortar branches and service) and the sense of security that size, brand and trust created. 3
“Much of the banks’ response looks like ‘digital lipstick’ to us — an effort to build a front-end customer facing portal that is entirely disconnected from legacy technology,” Mr Wilson noted in the report.
In contrast to banks’ digital lipstick, Nano’s offer is a bottom up rebuild of the customer experience. The product removes the need to have multiple accounts and centralises it into one place so customers can make the most out of their mortgage. The Nano home loan comes with an offset sub-account, a Nano Visa debit card for purchases, Apple Pay and Google Pay, as well as ‘Vaults’ to tuck away money towards any special goals such as travel or a renovation.
“Not only does Nano offer one of the world’s fastest applications, it’s also simply a better way to borrow which enables customers to manage their money all in one place, digitally and fee free,” Mr Walker said.
“On the back of the pandemic, consumer expectations have changed forever. The speed and convenience of digital is now the baseline. There is no turning back now, businesses will either adapt or die” he concluded.
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Variable rates are subject to change, but were correct as at 30 June, 21.