3 minute read
Global Insight
from Broker. June 2023
by FBAA
2023 Imbf World Summit
September 8, 2023 will mark the inaugural International Mortgage Brokers Federation (IMBF) World Summit in Las Vegas, USA. This summit will be an opportunity for around 100 brokers to come together from all over the world and discuss issues from their particular countries, and potential fixes. Attendance packages are available to FBAA members from June 15. (See page 14 for details.)
Many countries around the world are experiencing similar issues in their finance and mortgage broking industries, just at different speeds. This is the reason I co-founded the IMBF with Canada back in 2015, to be in front of the curve when issues arise. Through this summit, we will look at common issues on a world scale, and workshop solutions. From there, we will write a white paper with our findings, tailored to each country. Our IMBF member countries will then use this white paper in discussions with government and regulators. We want government and regulators to see that we are collaborating on a global scale and working through problems together. We believe this will support informed decisions. I know the Australian government will appreciate this global insight when looking to formulate new legislation or regulations relating to Australian brokers.
The USA’s major broker association, National Association of Mortgage Brokers (NAMB), is hosting their 50th anniversary conference that weekend. They have kindly gifted the IMBF the function room to reduce the cost of setting up this world summit.
The FBAA is heavily involved with the IMBF, and I invite any members interested in attending to contact me at pwhite@fbaa.com.au. This event is designed for those who have high-level interest in our industry and its global impacts and solutions.
Australian Mortgage And Rental Affordability Survey
We recently completed our second piece of research with McCrindle on the Australian Mortgage and Rental Affordability Survey. Our first piece was released around 18 months ago, and focused on what was happening with interest rates looking forward, and loan customers’ and renters’ stress points around affordability. At the time, 57% of people said if their rent or mortgage payments went up by $300 or 1%, they could not afford it. Fast-forward to today, we have found that Australians are very resilient and we’ve not seen any concerning spikes in cases of hardship. Yet.
This second piece of research does, however, tell us there is a financial impact of this increased rents and mortgage payments. We’ve learned that 61% of people have cut back on their weekly spending habits, which includes grocery bills. Some 69% of people said they have cut back on holidays, leisure and social activities to be able to pay rent or mortgage payments, which is why we’re not seeing that abnormal strike in arrears or complaints and hardship. In line with that, 46% of people have either withdrawn on their mortgage, whether from an offset account or redraw, or their allocated savings, or they are about to withdraw funds. Other impacts are that 58% of people have taken on additional work or are looking at taking on more work to gain a second income and ease pressures of increased cost of living, namely mortgages and household expenditure.
With learnings like these, one of the things we look at is the impact on people’s mental health; 50% of people registered increased stress, 48% feel uncertain about the future and 26% have reported tension in their relationship. We know financial stress is a key contributor to divorce. These findings are obviously concerning, and we encourage anyone experiencing mental well-being or relationship concerns to access support. Financially, we encourage loan customers to reach out to their bank or broker to determine options.
Our concern here is, have we got to the end of stretching that rubber band and is it about to snap?
Interestingly, this research also showed us that just under 20% of the people who sought help from a psychologist, therapist or counsellor to cope with rising interest rates are aged 18 to 28 years. These are people who have never seen an interest rate rise, they have only been borrowing within the last 10 years when interest rates always been on decline.
We have taken significant learnings from this research, and have had a number of critical conversations with media and government, with more to come. There are some key impacts here we need to watch. Our advice when talking to Australian loan consumers through media is always ‘talk to your broker’.
Senate Inquiries
As always, I have been involved in the usual flurry of stakeholder engagement with consultation papers with government. In late April and early May, the FBAA was invited to appear in front of two Senate inquiries on behalf of industry, as the only representative broker association.
We presented on behalf of industry to the Senate Economics Legislative Committee, which looked at consumer data rights (CDR) outcomes. We presented on the issues and concerns we have identified and also where the value and benefits are in CDR. Although it’s early days, we believe CDR will be very beneficial to industry as it evolves and grows into the future.
The research we completed recently around Australia’s mortgage and rental affordability featured heavily in our presentation to Senate Select Committee to Cost of Living pressures. Within this presentation we were asked about our ongoing views regarding APRA and buffer rates. We maintained our position, that buffer rates and serviceability need to be should be reduced to 1.5-2% for existing borrowers, that the existing 3% is too high and needs to be reassessed. Buffer rates remain on our agenda, and I will update you as this item progresses.
Peter White AM Managing Director