Dear Mr Bouris, referring to YBR’s two-page announcement to the Australian Securities Exchange, BFCSA(inc) have some simple questions concerning 'pretender' wealth management company Yellow Brick Road and Macquarie Bank.

1.) How is YOUR base rate determined? --as any purported 'real' discount on a base rate that might "exceed" the standard rates offered by other lenders, would be deemed a “Clayton’s" discount by nature, hence, false & misleading to 'trusting' consumers.

2.) Was it just a drafting error, or otherwise? --when you asserted,"All successful applicants will get the discounted rate of up to 0.86% irrespective of their status, guaranteed for the life of the home loan after Yellow Brick Road’s first 12mths initial 1.15% discount off the [floating] "base rate".

3.) Who is the 'real' apprentice, Mr Bouris?--sorry, trick question(?) see by asserting a rate discount ... “up to 0.86%” is not the same as affirming a rate discount “of 0.86%” -- as the term “Up to” may indeed denote "zero" application and/or adjustment.

4.) Does the 'up to ).86% represent an intened disctretionary manoeurvre on your part Mr Bouris?  or just a loose-lipped Gadens Lawyer et al?

5.) Mr Bouris, is it your under-lying true & correct position to "guarantee the principal will never be reduced by the hapless borrower for the life of the home loan by contriving, -- 'honey-moon rate' inducements; 'unpegged' base rates; and 'Clayton's' style discounts? 

6.) Mr Bouris, in YOUR "presence of mind" --do you hold a belief that all consumers were born yesterday?..qualified as being,"...utterly incapable of possessing any memory of past, present & future 'flagged' bankster mis-behaviour".

7.) Mr Bouris, why is it? -- that aforementioned critical and substantive information is absent any press release, hitherto --premised on being “price-sensitive” 


#The BFCSA(inc) --and I'm certain all prospective "well targeted" home loan participants -- your retail investors alike -- await your timely, and no doubt, informative response, --facilitating the process of "consumer enlightenment".


Challenges to big four mortgage dominance welcome, but YBR-Macquarie partnership raises questions


By Kevin Davis
Friday, 09 November 2012

Wealth management company Yellow Brick Road and Macquarie Bank have foreshadowed some sort of relationship that will provide a “much-needed alternative for Australian consumers”, with the first step being a new mortgage product.

Challenges to the big four banks' dominance of the mortgage market are welcome (even though this writer has shares in those banks, and also in Macquarie). But there is a lot more information needed before the positive spike in YBR’s share price following the announcement could be seen as warranted.

While as an academic researcher I do not believe it appropriate to generally comment on business strategies of specific companies, I don’t think my social conscience can let this one pass.

Take the following description in YBR’s two-page announcement to the Australian Securities Exchange. It reads:

“Yellow Brick Road’s opening move is a 1.15% discount off the base rate of 6.65% for the first 12 months on residential home loan products.

After that, a discount off the base rate of up to 0.86% is guaranteed for the life of the loan… All successful applicants will get the discounted rate irrespective of their status."

Now, it may just be a drafting error, but “up to 0.86%” is not the same as “of 0.86%”. “Up to” could include zero! But even more relevant is the question of how the base rate is determined.

It may be 6.65% today, but what will it be in a year’s time? A quick search of the YBR website provided no information to answer this question – even among the list of FAQs provided. A discount on a base rate that might exceed the standard rates offered by other lenders would be a “Clayton’s discount” (for those who can remember the ads for “the drink you have when you’re not having a drink”).

Now, it maybe that the tie-up between YBR and Macquarie will enable funds to be raised at a rate to finance mortgages which means that the YBR base rate is competitive with loan rates of the big four and other lenders – although how is not clear. But more fundamental (or maybe it’s semantic) is the issue of what is meant by a base rate which no one pays? All successful applicants, it is stated, get the discounted rate.

I can imagine the possibility that a relationship between a wealth management company such as YBR and Macquarie Bank could yield potential economies and efficiencies. And I look forward to more information to assess that.

But a two-page news release with the sort of information contained is really no news at all – even if it was listed on the ASX announcements as being a “price-sensitive” announcement.

Kevin Davis is research director at Australian Centre for Financial Studies

This article originally appeared on The Conversation.