Athena sticks with prime but spreads the origination net

In the highly competitive Australian residential mortgage space, Athena draws on its specialisation in technology and its digital platform to stand out from the crowd. Athena’s Sydney-based group treasurer, Jason Finlay, discusses the issuer’s collaborative approach to origination, its funding – and cost of funds – strategy and business prospects.

Athena was established to offer an efficient home-loan product to prime borrowers. This lending sector has been particularly competitive in recent times – how has Athena responded?

Athena started its journey as a digital only lender in 2019. We have since expanded to offer our product through broker networks. More recently, we have launched the Mortgage Choice partnership in which we power the Mortgage Choice product range offered through its broker network. We are very pleased with this addition and are already writing substantial volume through this new channel.

This is not the first partnership Athena has developed to support its origination and funding. What role do they play in the business strategy?

Partnerships with commercially and strategically viable outcomes for all parties are very important elements of our business model, alongside conventional, standalone market participation. Partnerships have many benefits in planning, efficiency and risk management, which can help parties manage more smoothly through volatile markets. Athena has strong partnerships in technology, origination and funding.

On the funding side, we deal with more than 15 wholesale funders ranging from senior lenders, mezzanine investors and whole-loan-sale partnerships. In origination, we have substantial partnerships with broker networks as well as the Mortgage Choice white label.

Many Australian nonbanks have responded to the mortgage lending environment by diversifying their books. Is this something Athena is considering?

Athena’s offering will continue to focus on prime residential mortgages but we have been expanding product features and choices for a wider set of high-quality borrowers. We are still underweight in segments such as investor and self-employed loans, hence we are enhancing our capabilities in those areas.

How does Athena seek to differentiate its offering to win business in a competitive market?

Athena has a strong point of difference for customers. From the beginning, our core proposition has been built around fairness and transparency of pricing. Our automatic rate-match promise remains unique in the market.

In addition to this building block, we have developed a market-leading application process as well as an everexpanding range of product features which are particularly attractive to borrowers with more complex needs, such as investors with multiple properties.

We have translated our strength in technology to also drive strong differentiation in broker experience. We have partnered to build very good origination platforms in the broker segment and this has enabled us to get to unconditional approval for deals in less than a day.

What are you seeing in the performance of the loan book? Is credit quality holding up despite higher rates?

The book’s quality, in the sense of arrears performance, has remained outstanding through the interest rate tightening cycle. We credit this to our strong credit standards and processes, and believe we have a good combination of automation and experienced credit officers within our origination process.

What are Athena’s funding plans for the next 12 months?

Athena’s funding strategy continues to be to develop and engage with a diverse range of funding options, which we view as a prudent risk management approach as well as being commercially sensible. We have the capacity to align mortgage product to funding channel to some extent.

Over the next 12 months, we expect to increase usage of long-term over short-term funding channels, acknowledging that we would particularly like to increase the frequency of term RMBS [residential mortgage-backed securities] issuance in support of added liquidity.

Might this include further use of private placement funding?

We will continue to develop and use a range of funding channels, including private placements. These are valuable transactions for the issuer and the investor, for a variety of reasons. Athena has issued via private placements twice in the past. We are in the process of executing a call on our initial transaction and we would definitely consider private placements again.