Rams Rebuilds From Scratch

Sydney Morning Herald

Monday February 18, 2008

Danny John

THE home loans lender RAMS is looking to hold its standard mortgage rate at a slightly lower level than the big banks as it tries to rebuild its business from scratch after being severely hit by the worldwide credit crisis last year under its original owner.

But the company, whose main operations - including the RAMS brand name and 100-strong network of franchise outlets - were acquired by Westpac in a fire sale from the troubled RHG Group, has ruled out deep discounting of its main mortgage offerings as part of its relaunch.

Having brought its rates back into line with other lenders six weeks ago after raising them last year after RHG's financial problems, RAMS has indicated it could use the backing of its new parent's balance sheet to keep its key loans about five basis points below the current rate of 9 per cent.

Bought for $140 million by Westpac in a deal that was completed on January 4, RAMS relaunched its business last night with a national TV campaign with effect no customers. Excluded from the sales was RHG's $14 billion loan book and its existing 60,000 borrowers.

But the deal did include the rights to Raymond the Ram, whose woolly words buttressed the old company's assault on its competitors. Raymond still appears in the new TV campaign but only at the end of each spot, spouting the RAMS telephone number. The new RAMS said inquiries for loans last month from its traditional base of first-home buyers, self-employees and people looking to refinance was running at 80 per cent of January last year. It now has to convert those requests into mortgages to rebuild its loan book from almost nothing.

Under the relaunch the firm will branch into insurance by offering home and contents cover to its borrowers and into commercial loans for business clients looking to buy their properties.

It also plans to re-enter the mortgage broker market with new loan offerings.

The test for RAMS remains its ability to reassert itself in a fiercely competitive arena and where the drying-up of once cheap finance from the global funding markets that underwrote its mortgages has removed the price advantage of the non-bank lenders.

But the extra premium likely to be demanded for the increased risks of borrowing means companies like RAMS will be unable to rely on price to achieve what they did 10 years ago.

© 2008 Sydney Morning Herald

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