20 May 2010

The House that Ken Sayer built

Even though Mortgage House experienced over 300% growth during its first year of trade, managing the growth was not without some bumps along the way.

Ken Sayer, CEO, tells his story of how he built one of Australia’s fastest growing non bank lenders, and the lessons he learnt along the way.

When speaking to Ken Sayer, it’s very obvious why the Mortgage House CEO has been so successful in his business life. Calm, methodical and inspirational are just some of the qualities Ken exudes as he speaks about the journey he’s been through to get Mortgage House to where it is today. You’d think that owning and managing such a successful business experiencing huge growth would have been a pretty smooth journey for the former banker, but it’s not been without some harsh lessons.

Leaving the institutional world at just twenty-nine whilst working at Barclay’s as a junior in their merger and acquisition department, Ken decided to follow a different path. “I left because these institutions dwarfed me, and I never thought for one second that I could own one. So I stepped off the train and thought I’d build my own business, not thinking that it would ever amount to anything substantial, but knowing that I wanted to build it.”


MD/CEO and founder of Mortgage House has over 30 years experience in the mortgage finance industry, with a focus in home loan lending.

On the road to rapid growth

After some time on his own in commercial leasing and hire-purchase, Mortgage House was set up in 1998 by Ken, who also took on three partners. To cut a long story short, the partnership dissolved but Ken retained the Mortgage House brand and took the company on.

“Period between 1999 and 2004 was mayhem, [the company] experienced over 300% growth rate.

Managing growth became my complete and total focus. I had to recruit department heads to displace under achievers, and that’s where it became challenging. I needed a department heads in sales, operations and credit, whereas I maintained the above line marketing,” says Ken.

The difficulty of managing the growth was compounded because the Mortgage House name was gaining traction amongst consumers too. Ken could see that confidence and satisfaction levels amongst the Australian home buying public had dropped substantially because they were no longer keen to do business with their banks.

“You could call it luck or good timing, but with growing [customer] dissatisfaction with banks and a more recognised brand coming through the ranks, they somehow both super-glued themselves to each other, which is why we grew at 300% per annum, it was absolutely insane.”

Another reason for that success was that in the late nineties and early 2000’s, Ken says he was ‘discovered’ by banks and lending companies, suddenly he was on their radar. Subsequently he entered into a long term funding agreement with Macquarie Bank, and off the back of the new relationship, introduced competitive home loans new to the market. “We brought in plain vanilla home loans that had no features but were much cheaper than the banks. We also announced premium mortgages appealing to Australians featuring unlimited free transactions, along with internet, cheques and BPAY ® and all the creature comforts peculiar to a home loan. We provided fully featured mortgages with Bank account functionality 0.3% cheaper than the banks while perpetuating our fee free mission.

Growth was colossal.” But despite success, Ken realised that just trying to keep a lid on this growth was going to need some serious investment from him, both in terms of implementing systems and processes as well as looking after his team. Some of it was successful, whereas in other areas he learnt some pretty big lessons.

Getting the systems in place

There are a plethora of checks and balances within the home loan process and validation required to protect a mortgage lender from making an incorrect assessment. It was essentially high touch, cumbersome, archaic data entry platform with no reconciliation and hindsight review. There would typically be over twenty separate detached, error-prone, inconsistent, manual transactions, particular to any single home loan application. Our systems had to be upgraded with enhanced sophisticated business rules and capabilities, “the internet occupied centre stage for us.”

I stepped off the train and thought I’d build my own business, not thinking that it would ever amount to anything substantial, but knowing that I wanted to build my own.

Mortgage House were one of the first companies in Australia to introduce a complete online system back in 2001. Instead of multiple touch points, there was one single automated point of data entry. “We could enter the customer details and not have to punch in the date because the system automatically recognised it. We didn’t have to punch in the time because the system self generated. But the significant difference was that every time I touched a button or progressed the application, the system would send an email out to the customer advising them of the status change. For example, ‘Dear Mrs Smith we just ordered a valuation from ABC Valuers and Mary will be contacting you to arrange an inspection.’ Errors disappeared, delays disappeared, data entry times reduced hugely – the savings were incredible.”

In effect, Mortgage House built a loan origination platform for their business and designed by their business. “You cannot buy this from an American or an offshore company, you can’t buy this system in Australia either, and it is 100 per cent proprietary.

I could process a hundred loans a minute, but no one would be in the office; they’d all be in front of customers. It’s just amazing,” he adds.

In 1999, Mortgage House also ordered a Telstra Business Phone System. The Internet was new, broadband was not well known yet, and Australians were still struggling to pay $60 or so per a month for internet access.

Mortgage House also installed a Telstra frame relay in 1998, delivered via a fibre-optic cable “enjoying the spoils of 100% internet uptime”. It’s about investing in the right systems and partnering up with substantial business partners. Our system came in the form of an ensemble of a frame relay, proprietary loan origination platform and a Telstra e-PABX phone system, all working together in a unique collaboration providing the means for a competitive advantage.”

But it hasn’t stopped there, the world has changed again, Mortgage House is preparing to invest in a new Telstra Business system in anticipation of further growth; it’s the most ambitious project embarked upon to date encapsulating voice, fax, internet, audio, video capabilities. One system to service and contain the communication requirements of our entire branch network.

“This helps to provide greater flexibility to our entire organisation.”

In 2006, just before the GFC and the subsequent two years, we capitalised and ‘re-designed’ our own business. We secured our funding, servicing lines. We’re also now expanding again. The new Telstra communication platform will underpin our next growth phase. It is my opinion that the lending business in this country will re-emerge in the good old spirit on or around March 2011.”

That’s where my heart tells me, and my mind tells me where we’re heading. It’s going to be huge in a couple of years, and we’re getting ready for it.”

You also have to be able to entertain the concept that some people actually know more than you do, and you have to be prepared to listen.

Looking after your number one asset

Whilst the systems and process side of the business was well looked after, Ken admits to struggling with integrating people into the business properly. “One of my biggest regrets was that in the early days, I had no appreciation for the human side of the business. It was a transaction and I didn’t treat people as individuals.

I would hire ten new people a week and end up terminating eight. It was terrible in terms of the image it left of our business with those that departed, and although we peaked at two hundred and twenty, I would have upset a couple of thousand along the way,” he adds.

“We’re now a completely different business.

We now meet and greet in a structured and considered format, introduce ourselves to prospective employees, expand on our history and vision. Instead of sourcing candidates to fit or fill a roll or task, we focus on ones strengths, aptitude and ambitions with the view to create a roll that best captivates (reverse engineering).

“Right now we have zero churn, and we don’t hire team members unless we plan on keeping them.

We spend weeks with in the early days, progressively introducing new recruits to the Mortgage House culture, walking through the process, introducing to senior staff and the leisurely side of our business. We seek/encourage input and feedback, seldom sought in the early days.

You wouldn’t believe it’s the same company.”

Ken admits that in the early days, Mortgage House used to be a factory, but now it’s fairly civilised and in some respects, immaculate. “We started in this world as brokers. In 1998 we were the banking alternative, and we would lend you money under our brand.

Now we are the actual lender. If John Smith approaches Mortgage House we lend them the money. So we’ve gone from broker to mortgage manager to the absolute lender in our own right.”

Technology has certainly had a role to play in that success, and it’s the early decisions to invest heavily in those areas that saw Mortgage House rise so rapidly in the last ten years to where it is now. It was the systems and processes Ken employed which meant he was able to leapfrog his competitors and provide a unique service to customers looking to borrow.

If you could do it all again?

It’s clear that the way Ken ran his business with regards to the process and technology he employed, along with a change in attitudes towards people management have taken the Mortgage House business to where it is today. Unique at the time, the business strategy implemented by Ken allowed for far greater efficiencies and gave him a massive head-start over the others in his field.

“What I learnt is – If one starts with motivated suitably qualified people, aided by a comprehensive training program with special consideration given to individual goals, aspirations and personal lives. One can expect the formation of an exceptional team.

“Secondly, one needs to accept and entertain the notion that some individuals may know more than one does, and be prepared to listen.”

“Lastly and definitely not least, once a business plan is carefully considered and composed with key stake holders’ approval. Proceed with no hesitation and reluctance till complete fulfilment has occurred with periodical reviews.”

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