14 Mar A lender that cares – Nathan Walsh
Disruption is the go to word that signals change in a market sector that is both popular and in need of re-modeling. No surprise then that the finance sector is undergoing change. Today I will tell you about a new home loan promising to help homeowners pay off their home loans faster and it is not a bank. Music to your ears? Nathan Walsh tells us about Athena Home Loans.
Kevin: What’s called the trust gap, the gap between borrowers and lenders grew strongly through the Banking Royal Commission in a market that is ripe for disruption. Following the fall out from the Royal Commission a company called Athena has been chipping away for two years to build a very different home lender model. Joining me to talk about that Nathan Walsh, one of the founders of Athena. Nathan, thank you very much for joining us. And congratulations on what you’re doing.
Nathan: Thanks Kevin. Fantastic. Thanks for having me.
Kevin: It really has been ripe for disruption and the banks are really copping a bit of hiding. Now tell me about Athena, your business model, how does it work?
Nathan: Yeah, so Athena launched this week. So we really launched with a mission about how to help save Aussies a whole bunch of money, help them pay off their home loans faster. So launching with some really competitive rates, so 3.49% on your own home and from 3.89% for investors. So really for a family switching from typical big bank rates that could mean saving tens of thousands of dollars over the life of their loan.
Kevin: Yeah, but it’s not so much about rates is it? That’s what we’re learning because I think some of the research has shown that customers cited the most common reasons for the decrease in this trust gap was the fact they felt like they were being ripped off. They felt the banks were dishonest and there was a lack of transparency. So it’s more than just rates isn’t it?
Nathan: That’s absolutely right Kevin. So we’ve been listening to Aussies and basically 80% are now saying they’d like to find a more trustworthy home lender. It’s only one in four borrowers who think their lender cares about their financial well being and one in five think they act in their best interest. So I think that translates into things like real concern about the home loan rate bait. Being lured in with shiny rates and then being stung with rate creeping in fees. Loyal customers are paying hundreds of millions of dollars more every year than they new customers on rates.
Nathan: So you’re absolutely right. It’s much broader than just the headline rate.
Kevin: And Nathan when we hear things like customers are concerned that the banks really care about them. I was staggered to see that nearly all borrowers 93% actually want to pay off their home loan faster but less than one in five thinks their lender actually wants them to do that. And you can understand that when the banks are seen as really chasing more and more profits. So therefore, the longer they keep someone in a loan, the more profitable they’re going to be.
Nathan: That’s absolutely right. It is time is money. The shorter the loan, the less you pay and the experience with borrowers is when they’re getting on top of things, they get the phone call of, “Would you like a credit card with that?” How do you increase the credit. As opposed to, how do we really help you own the home and not the bank.
Kevin: It’s a great sentiment that you put forward with respect, how can we believe you? What is the basis of Athena? Why are you doing this?
Nathan: So as we sort of talked about. We’ve been on a two-year journey really looking to reinvent the model. So we should be clear, so we’re proudly not a bank and never will be. So that means we’ve been able to cut the branches and bankers and overheads so we can pass on killer rates to borrowers and cut the fees.
Kevin: But how do you do that? How can you run a more low cost model and be successful than the banks?
Nathan: So ultimately it’s a question about being much smarter around technology. So how do we create a very efficient platform focussing in on what a homeowner is asking for. What are their needs and how do we meet those? We’ve also been very focused on reinventing the model around the funding of the loans themselves. So looking at banks. Sourcing half a trillion dollars out of the superannuation system, banks, beautiful deal for the banks, making fat margins on that money. We’ve been able to source that funding directly. Which again, enables us to deliver a better deal to borrowers and then really help them meet that goal of how do you pay off your home loan faster.
Kevin: I noticed that your backdoor supported by Macquarie Bank. How does that make you different? Or how are you going to standout from the other banks?
Nathan: So, you’re right. I’ve very delighted to have support from Macquarie and Hostplus and a number of the other top VC firms in the country. Look, I think ultimately this comes down to a question of how do we be very single-minded about helping customers meet those needs and that’s the beautiful thing about working for a type of brand like Athena is we live or die on our ability to meet those customers needs.
Kevin: How secure is it if someone takes a loan with you? I mean that’s one of the foundations I guess of the banking system is that it’s always been fairly solid?
Nathan: Yeah, that’s right and that’s why we’ve been backed by some of the smartest money in town with Macquarie, as you said Hostplus and others. So ultimately we have our own backup servicing arrangements with people like Perpetual so there’s the security for the lender for the borrower on that basis.
Kevin: Because I noticed too in your publicity that fees are almost … Well, the fees are nil. There’s no change over fees. There’s no establishment fees. How are you making your money?
Nathan: So you’re absolutely right. So no application, no regular account fees, no exit fees. All we do is pass through the third party cost like evaluation on application. So this is ultimately about delivering great rates and in doing so incredibly efficiently for and therefore passing on the great rates.
Kevin: We’ve seen some tremendous offers come from the banks by the way of honeymoon rates and so on. How do we know that this is not just another one of those?
Nathan: Completely agree with that Kevin. That’s one of the big frustrations for borrowers. So we bring a pricing promise. We’ll never charge existing customers more than we offer new and that’s very different from the experience that customers have with their banks today where they are new customers … sorry existing customers are really subsidising the new. And it’s costing hundreds of millions of dollars. So we see that as an Australian first and really bringing fair pricing into a category that dearly needs it.
Kevin: We’ll certainly a lot of promises there and we wish you well. Anything that’s going to make it more transparent and easy for us to borrow money particularly at a time when it is becoming harder and harder for people to succeed and borrow. Nathan Walsh, thank you so much. Nathan is one of the founders and the CEO for Athena. The website, I imagine is quite simple. It’s just Athena is. Athena.com.au.
Nathan: Yes, that’s right Kevin.
Kevin: A-T-H-E-N-A. Hey Nathan, all the best mate. Thank you very much for spending some time with us today.
Nathan: Wonderful to chat.