Yellow Brick Road confirms Macquarie Bank funding deal to challenge major bank mortgage dominance

Mark Bouris's Yellow Brick Road franchise has confirmed a mortgage funding tie-up with Macquarie Group, part of an ambitious and distinctly long-term plan to take on the major banks as the fifth banking pillar.

In a statement to the ASX, Yellow Brick Road chief executive Matt Lawler said it had signed an origination agreement with Macquarie Bank, the financial services subsidiary of Macquarie Group, to "develop branded banking and wealth management products and services, including the terms of a new mortgage funding and distribution arrangement".

Macquarie will provide wholesale mortgage funding to Yellow Brick Road, allowing the franchise to expand its mortgage offering with plans for further wealth management and banking products in 2013.

In conjunction with the funding from Macquarie Bank, Yellow Brick Road has launched a range of discounted mortgage offers as part of a plan to offer a “much-needed alternative for Australian customers”.

The financial services group has launched what it calls “an aggressively priced range of mortgage products” with the details of these on its website today under the heading “Smash your home loan”.

These include an introductory variable rate mortgage priced at 5.5% for the first 12 months (among the lowest offerings in the market) and available to all "successful mortgage applicants", not just a chosen few who qualify for a discounted offer.

The rate reverts to 5.79% after the first year with a comparison rate of 5.77%. The website also lists the ongoing rates of the major banks and some of the regional banks, starting with Westpac at 5.9%, with savings ranging from $7,000 (for current ANZ customers who refinance with Yellow Brick Road) rising to almost $23,000 (for Bank of Queensland customers) over a 25-year period for a principal and interest loan of $300,000.

The products will be distributed through Yellow Brick Road’s 140 branches located across Australia – with a heavy concentration of branches in Sydney, Melbourne and Brisbane.

Yellow Brick Road will partner with Channel Nine to promote the offering, the same television channel that ran The Apprentice, featuring YBR executive chairman Mark Bouris as the host.

All of this is part of a campaign aimed at providing some competition to the banking sector, which controls 92% of the mortgage market and is heavily dominated by the major banks.