MPAMAGAZINE.COM.AU ISSUE 21.08
CELEBRATING 20 YEARS COMMERCIAL LENDERS ROUNDTABLE The annual discussion touches on big industry topics
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TROY FEDDER Suncorp’s head of broker partnerships is getting his team match fit
NEW BROKER Opportunities abound for new mortgage broker recruits
27/07/2021 9:47:44 am
Winner. For Value. For Service. Money magazine named us Bank of the year and Business Bank of the year for an incredible fourth year in a row. Further proof of the continued value we offer our customers.
That’s the Suncorp Spirit
Visit businesspartners.suncorp.com.au or contact your Suncorp Bank BDM.
Banking products are issued by Suncorp-Metway Ltd ABN 66 010 831 722 (“Suncorp Bank”).
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AUGUST 2021
CONNECT WITH US
CONTENTS
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UPFRONT 02 Editorial
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FEATURES
COMMERCIAL LENDERS PANEL
Commercial lenders discuss the rollercoaster ride of the last year and what brokers can take from it
FEATURES
MPA’S 20TH ANNIVERSARY
MPA celebrates 20 years in print with a look back at what made the headlines in the mortgage and finance space over the last two decades
BIG INTERVIEW
TROY FEDDER
Meet Suncorp’s head of broker partnerships, who has a real passion for the mortgage industry
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Twenty years of lessons as more mortgage brokers understand the importance of diversification
04 Statistics
First home buyers continue their search for property, while prices keep going up
06 News analysis
The RBA has said interest rates won’t rise until 2024, but big bank economists predict otherwise
08 Opinion
The FBAA’s Peter White reflects on the last 20 years, with positive expectations for the future
PEOPLE
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72 Other life
A love affair with music has inspired this broker's outstanding collection of vinyl records
FEATURES
NEW BROKER
As broker market share continues to grow, what opportunities and challenges are there for newcomers to the industry?
70 FEATURES
BROKERAGE INSIGHT
This mostly female team of brokers has overcome repeated lockdowns and continued to put clients first
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www.mpamagazine.com.au AUGUST 2021
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he last two decades of mortgage broking have seen immense changes. Regulations, market share and technology are just a few areas of the industry that are particularly different today. In 2021, Mortgage Professional Australia marks 20 years since its first issue hit desks. Flicking through those early magazines takes us back to the introduction of many of the regulations that are so standard today. There were also a lot of mergers and acquisitions, and movements involving industry players who are no longer around, as well as those who left the market and have since rejoined it. To celebrate the 20th anniversary of MPA, this issue looks back at some of the biggest stories of the past two decades. Another major change, even over the last five years, has been the increase in the number of mortgage brokers writing commercial loans. While the MFAA did not provide industry data 20 years ago – it didn’t even exist in its current form back then – its data today shows that the number of mortgage brokers writing commercial loans has shot up by 171% since 2015. For this month’s Brokerage Insight (page 70), MPA spoke to Loan Market
Borrowers typically need help with more than just their home loan; it makes sense for brokers to be able to go beyond that Geelong’s Sarah Thomson, who offers diversified finance solutions because she says providing only one service locks her out of the market. Borrowers typically need help with more than just their home loan; it makes sense for brokers to be able to go beyond that as they continue to grow their market share. It shouldn’t be hard to do either. In this issue’s Commercial Lenders Roundtable (page 14), participants talk about the similarities and differences between residential and commercial loans, explaining that commercial lending is often much easier and less time-consuming than many brokers realise. articularly now, as borrowers continue through the Particularly ups and downs of the pandemic and look forward to a gradual reopening of the country, they will need a broker’s help. Many will be seeking finance solutions for their businesses as they plan for the future; they may be thinking about taking on new staff, moving into a bigger space, or expanding into new services. Iff a borrower trusted you with a big expense like a home loan, you are the perfect resource elp them embark on the next stage of to help their journey.
Rebecca Pike, editor, MPA
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EDITORIAL
SALES & MARKETING
Editor Rebecca Pike
National Sales Manager Claire Tan
Contributors Lisa Stephenson, Peter White
CORPORATE
Production Editor Roslyn Meredith
Chief Executive Officer Mike Shipley
ART & PRODUCTION
Chief Operating Officer George Walmsley
Designers Cess Rodriguez, Marla Morelos, Ace Dequina Traffic Coordinator Kristine Jamir
Managing Director Justin Kennedy Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil
EDITORIAL ENQUIRIES
tel: +612 8437 4784 rebecca.pike@keymedia.com
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tel: +61 2 8311 5831 • fax: +61 2 8437 4753 subscriptions@keymedia.com.au
ADVERTISING ENQUIRIES claire.tan@keymedia.com
Key Media Australia (Mortgage) Pty Ltd Regional head office: Level 10, 1–9 Chandos St, St Leonards, NSW 2065, Australia tel: +61 2 8437 4700 • fax: +61 2 9439 4599 www.keymedia.com Offices in Sydney, Auckland, Denver, London, Toronto and Manila
Mortgage Professional Australia is part of an international family of B2B publications and websites for the mortgage industry AUSTRALIAN BROKER
simon.kerslake@keymedia.com T +61 2 8437 4786
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Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss.
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UPFRONT
STATISTICS BROKERS GROW MARKET SHARE
FIRST HOME BUYERS STILL EAGER
MARCH QTR 2021 RESULTS
According to data from REA Insights, the number and share of enquiries from first home buyers increased in May, despite the end of the HomeBuilder scheme. Over the month, 61.7% of all enquiries were from buyers who were existing owner-occupiers, compared to 21.2% from first home buyers and 17.1% from investors.
27%
year-on-year increase in settlements value in March quarter 2021
57.5%
broker market share of all new residential home loans
BIGGEST PRICE INCREASE IN DECADE
$62.2bn
value of loans settled by mortgage brokers
5.4
percentage point increase in broker market share from March quarter 2020 Source: MFAA and CoreLogic
The March quarterly rise in the weighted average capital city median property price was the highest in 10 years. Sydney’s house price still tops the capitals and is 49.8% above the national average.
Houses
Units
Australia
up 6.8% to $873,911
up 2.7% to $621,313
Sydney
up 8.5% to $1.309,195
up 2.2% to $751,038
Melbourne
up 8.8% to $1,004,500
up 4.8% to $672,500
Brisbane
up 3.5% to $585,000
stable at $410,000
Adelaide
up 1.3% to $520,000
Perth
up 2.6% to $390,000
Canberra
up 2.0% to $500,000 down 1.1% to $752,000
Hobart
up 5.7% to $623,750
up 10.7% to $481,710
Darwin
up 9.4% to $547,000
down 0.8% to $382,000
stable at $510,000
up 3.1% to $330,000 Source: Real Estate Institute of Australia Real Estate Market Facts Report, March quarter 2021
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WHAT SMES NEED HELP WITH
EMAIL ENQUIRIES TO REAL ESTATE AGENTS BY ENQUIRER TYPE
Of the SMEs that turn to advisers and brokers for help with their finances, 93% seek tax and compliance advice, but they also need support with the following:
(national, month-on-month)
FHB
Owner-occupier
Investor
1 in 4
200 180
business owners are unsure of what measures to put in place for recovery
160 140 120
1 in 4
Base 100 @ Jan 19
100 80
were declined for a lending product, causing cash flow issues
60 40
1 in 3
20 0 Jan 19
Apr 19
Jul 19
Oct 19
Jan 20
Apr 20
Jul 20
Oct 20
Jan 21
Apr 21
turn to trusted external advisers for help in separating their personal and business assets
Source: REA Insights, Housing Market Indicators Report, June 2021
RISING INTENTIONS TO BUY Intentions to purchase property remain far higher than in previous months, reflected in stronger numbers of Google searches and home loan applications.
NOT THE RIGHT TIME? Borrower sentiment on whether it is ‘time to buy a dwelling’ faced its fifth monthly decline in June, dropping to 27% below its November level.
ANNUAL % CHANGE IN HOMEBUYING INTENTIONS
CONSUMER SENTIMENT INDEX: IS IT TIME TO BUY A DWELLING?
100%
75%
Source: ScotPac SME Growth Index
Household spending intentions
120
Smoothed
80
50%
119.2
116.9
107.6
103.5
100
96.1
60 40
25%
20 0
0%
-20 -25%
Jul 17
Jul 18
Jul 19
Historical average
Jun 2019
Jun 2020
May 2021
Jun 2021
-7.1
-10.7
% monthly change
% annual change
Jul 20 Source: CBA Household Spending Intentions Series, May 2021
Source: Westpac-Melbourne Institute Index of Consumer Sentiment, June 2021
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UPFRONT
NEWS ANALYSIS
All eyes on interest rates The Governor of the Reserve Bank of Australia is insistent that the cash rate will not increase before 2024, but economists at the major banks are predicting earlier movements DESPITE THE assurances of the Reserve Bank that the cash rate will not rise before 2024, economists at Australia’s major banks have been predicting hikes as early as next year. Mortgage brokers, too, are expecting rate increases. A recent survey by mortgage broker platform HashChing showed that 55% of brokers believe rates will rise in 2021. The survey also showed that close to 60% of brokers see interest rates as the reason borrowers come to them. In a research note, Commonwealth Bank head of Australian economics Gareth Aird said he expected an initial rate hike of 15 basis points in November 2022, followed immediately by another hike in December, which would take the cash rate to 0.5%. Three more rises in the first three quarters of 2023 would bring the cash rate to 1.25% – “the level at which we assess the cash rate to be neutral”. ANZ economists have also forecast early rate rises, although within a slightly later time frame than CBA predicts. ANZ is expecting the Reserve Bank to increase the cash rate in two steps in the second half of 2023 to take the rate to 0.5%. Westpac chief economist Bill Evans also predicted the RBA would hike interest rates at least a year earlier than the central bank’s own forecast of 2024, before adjusting his sentiment due to high household debt and anticipating a peak of 1.25% in 2024. Some commentators have not entirely
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agreed with the predictions, however. Digital lender and payment provider WLTH’s CEO and co-founder Brodie Haupt said CBA’s forecasts were “fairly extreme” in light of the recent COVID factors at play in Sydney and Melbourne. “Dare I say it, that COVID could potentially have some positive effects in this scenario by delaying the aggressive cash rate hikes that have been predicted, from a consumer’s perspective,” Haupt said. The potential of a cash rate increase could be a positive thing for digital lenders and non-banks, he added, as it would provide the opportunity for them to take market share
lock customers in on fixed rates before the market bottoms out”. CreditorWatch’s May Business Risk Review showed that the economy was “losing some momentum”. The research showed that credit defaults had increased by 9% against the three
“COVID could potentially have some positive effects by delaying the aggressive cash rate hikes that have been predicted” Brodie Haupt, WLTH from majors by educating their customer bases on the positive use case for fixed rates. “By offering long fixed rate periods [we can] help customers reap the rewards of increasing rates,” he said, “which is contrary to the fearmongering the majors convey in a market where interest rates are coming down by making large marketing pushes to
months to February, and external administrations had risen by 24%. While the outlook is more positive than it was one year prior, there is emerging fragility off the back of the end of JobKeeper. “We’ve been saying for some time we won’t be able to get a true picture of the economic health of the nation until federal government
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ARE INTEREST RATES ABOUT TO GO UP? Lenders’ interest rates have been dropping steadily for a couple of years, but even without the RBA increasing the national cash rate, banks are starting to hike their own rates as they succumb to global funding pressures. The RBA’s term funding facility, which had supported banks with funding to overcome cost pressures, ended on 30 June 2021.
Lenders’ average owner-occupier variable housing rate (% per annum) Outstanding loans
New loans
4.00% 3.75% 3.50% 3.25% 3.00% 2.75% 2.50%
Sep 2019
Jan 2020
May 2020
Sep 2020
Jan 2021
May 2021 Sources: APRA; RBA
stimulus measures, such as JobKeeper, have ended and their impact has stopped artificially propping up some businesses,” CreditorWatch CEO Patrick Coghlan said. “Early signs from the Business Risk Review suggest there will be a shake-out of poorly
would increase rates, but he said we should “not get ahead of ourselves”. “There are holes in the ‘how good are we doing’ headlines, and that includes a share market that is more vulnerable than seems to be the focus that it deserves,” Dale said.
“Right now, nobody knows when circumstances will become appropriate for interest rates to rise, and that includes the RBA itself ” Harley Dale, CreditorWatch performing businesses over the coming two quarters. The May 2021 CreditorWatch Business Risk Review is one of the first red flags in that regard.” Speaking after the RBA’s decision on the July cash rate, CreditorWatch chief economist Harley Dale said speculation was running wild about when the central bank
“Right now, nobody knows when circumstances will become appropriate for interest rates to rise, and that includes the RBA itself.” Although economists are talking about rising cash rates, APRA has been preparing for a negative cash rate. The regulator began a consultation in mid-July, asking the banks to ensure their
systems could cope if negative interest rates should occur. The Reserve Bank has said a negative cash rate would be extremely unlikely, but in its introduction to the banks, APRA said that “does not preclude the possibility of a negative cash rate in the future”. Whether rates go up or down eventually, RBA Governor Philip Lowe continues to stick by the bank’s 2024 prediction. In a recent speech, he said inflation would need to be sustainably within the 2–3% range before changing interest rates. “It is not enough for inflation to be forecast in this range. We want to see results before we change interest rates,” he said. “For inflation to be sustainably in the 2–3% range, it is likely that wage growth will need to exceed 3%.” Explaining that the current rate of wage growth was materially less than 3% and was expected to lift gradually, Lowe added: “We … expect that it will take until 2024 for inflation to be sustainably within the 2–3% target range.”
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UPFRONT
OPINION
GOT AN OPINION THAT COUNTS? Email rebecca.pike@keymedia.com
Reflecting on two decades of broking Broker advocate and FBAA executive director Peter White looks back at how the industry has overcome challenges and changed for the better HAPPY 20TH to MPA, and thanks for being an advocate for our industry. Twenty years ago, life was different. It would be another six years before the first iPhone hit the market, three years before Facebook was available to the world, five years before the first tweet would be sent, and for the next eight years bitcoin was a mere fantasy. From then to now, technology has rapidly advanced as it always does, life has become more instant, social media has monumentally altered the way we live and communicate, and, more recently, a global pandemic has brought about a cataclysmic lifestyle revolution. Yet as the saying goes, “the more things change, the more they stay the same”. In 2001, mortgage brokers were servicing customers just like we do now. They were prospering a growing market, and working hard doing what lenders were not: providing personal service, meeting needs and offering choice. Over the past two decades thousands of bank branches have closed across Australia. In 2001, on ABC’s AM radio program, host Linda Mottram started the bulletin with these words: “The eyes of regional Australia will be on the National Australia Bank this morning as it announces the details of bank closures and possibly thousands of job losses.” It had started years earlier and continues to this day. Banks are beholden to their shareholders, so profits come before people. Brokers have always represented something very different. Banks were seen as helping themselves and brokers as helping their customers. The year was 1994 and I was meeting with a husband and wife who were both nurses – at 1 am. Due to their shift work, it was the only
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time they were both available. I was the only person who made that effort, and I wrote the loan on the spot. Every broker has a story like that. That is why, despite endless government inquiries, regulator investigations and political nonsense, brokers continue to write more mortgages than all of the banks combined. A few years ago, our industry had to listen
embrace technology. Banks are starting to process documents digitally. COVID has forced us to meet customers on screen as well as in person, and this will remain part of our ever-evolving business practice. Regulatory conditions have tightened, and we must adapt. We must educate ourselves and ensure our professional standards stay high. The industry is changing for the better.
Despite endless government inquiries, regulator investigations and political nonsense, finance brokers continue to write more mortgages than all the banks combined to ridiculous and misleading comments from some so-called finance journalists, commentators, consumer activists, misinformed politicians and even some of the banks themselves during the Hayne royal commission. The royal commission was established to investigate bank behaviour, yet the final recommendations let banks off the hook while targeting brokers. Make no mistake – if those recommendations had been fully implemented, the result would have been the end of our industry and a return to a monopoly of the big four banks. Thankfully, common sense prevailed. It was a victory for the most important people – our customers. They vote with their feet, and they keep coming back. Put simply, they wouldn’t use us if we didn’t meet their needs. There have been changes over the years, of course, and this will continue. We must
We are more aware of work-life balance. The FBAA has prioritised mental health issues because healthy people equal a healthy industry. More women are entering the industry, and this diversity will help build our businesses. Our method may be different now than it was 20 years ago, but our message remains the same. The human factor our customers experience must remain our point of difference. Our industry was built on personal service, professionalism, expertise and offering a range of products. No bank can match this. That is still – and always will be – what drives us forward and sets finance and mortgage brokers apart. Peter White is the executive director of the Finance Brokers Association of Australia.
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PEOPLE
BIG INTERVIEW
TROY FEDDER: GETTING MATCH FIT FOR BROKERS After eight months in his current role, Suncorp’s head of broker partnerships is intent on reinforcing the bank’s relationship with the third party channel
EVER SINCE he wrote his first home loan at the age of 20, Troy Fedder has had an affinity with home lending and retail banking. In the last 15 of his more than 20 years in the finance industry, he has held several executive positions, but his latest is the one that means the most to him. Since December 2020, Fedder has headed
about the important part brokers play in the home lending process. “We’re seeing the industry at its best now, and it’s an exciting time to embrace different opportunities and capitalise on the current market,” he says. Fedder adds that the best interests duty is another opportunity to reinforce the
“I’m enjoying being part of an organisation that is so pro broker, where the whole organisation wants to see the broker channel and direct channel succeed, together” up the broker partnerships business at Suncorp Bank, leading its BDM team, broker support contact team and key projects. He says the best thing for him about this new role is being able to make tangible changes, drive business performance and deliver strong outcomes for the bank’s aggregator and broker network and customers. In particular, Fedder says he is passionate
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tangible value that brokers bring to the home lending process. “Brokers ensure customers have choices, and that’s critical,” he says. “I feel the passion that brokers have for the industry every day, and I love the way brokers, aggregators, industry bodies and lenders have come together over the past few years to improve our industry and
customer outcomes. It’s quite unique and motivates me even more to deliver better outcomes together.”
Achieving stronger customer outcomes together Sustained activity in the market is providing brokers with new opportunities. Suncorp has seen record volumes of home lending thanks to low interest rates, government stimulus and property market growth. Encouraging brokers to maintain a “proactive operating rhythm” with customers, Fedder says brokers already provide great ongoing service but should think about what more they can do to build even stronger relationships. “The pandemic has provided a lot of uncertainty for a lot of customers, so the more support you can give, the better outcomes you and your customers can achieve together,” he says. It’s not just the pandemic that has caused uncertainty for some customers, as parts of the country have also been affected by natural disasters. Suncorp introduced relief packages
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PROFILE Name: Troy Fedder Title: Suncorp Company: Head of broker partnerships Years in the industry: 20+ Career lowlight: “For a short period, I moved away from distribution, and I realised these roles didn’t give me enough time with customers. I learned I’m completely passionate about where I can make a genuine difference to brokers and customers, and I’ve never looked back!” Career highlight: “A career highlight has been moving into the broker industry, and specifically this role at Suncorp. I’m leading a dedicated national team within a business that is incredibly focused on growing the home lending portfolio, simplifying processes and working collaboratively with our brokers.”
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PEOPLE
BIG INTERVIEW
to help those customers affected by events like flooding and hurricanes, as well as a free health and wellbeing assistance program for brokers and their families. The tumultuous events of the last year gave the bank a clearer understanding of the importance of the broker network. Fedder says that while Suncorp changed its ways of working to support customers, it also leaned on brokers very heavily to help with the volume of enquiries. “We gained an even deeper appreciation of how valuable the broker network is to our business, and the importance of the skills and expertise they bring to customers,” Fedder says. “We also had to change the way we interact with brokers, transitioning to more virtual interactions particularly, via our BDM network. We understood the need to make further changes to better support our brokers; to listen to their feedback to make changes accordingly. “Changes included restructuring our team to ensure a focus on our broker relationships and deploying more resources into operations. We’ve considered key areas where brokers need us to work harder and have a pipeline in play to execute on these improvements.”
Investing in process efficiency and broker support Reflecting on the last nine months in his role at Suncorp, Fedder says the team “have been busy”. On joining the bank, he said it was clear that it needed to build a plan to “get match fit, and quickly”. To do this, he and the team worked to deploy more team members into operational and support areas, and Suncorp invested heavily in improving its processes. The bank has also invested in key markets, like Victoria, and Fedder has taken on another team member to help grow the business. Furthermore, Suncorp is refreshing its
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SUNCORP INTRODUCES DOCUSIGN
As of 28 June 2021, Suncorp began accepting digital signatures on its post-approval ‘Add’ and ‘Equity’ loan documents for individual borrowers through DocuSign. It is expected that digital signature enablement will take approximately 10 days off the application process by removing the need to rely on postal services (although postal and email dispatch methods will still be available). Other Suncorp loans will be enabled for digital signature in the future.
the processes for our broker and direct channels are the same. We do not differentiate between channels to deliberately favour one or the other,” Fedder says. “We’re committed to our brokers and consistent policies, and to making it easier for brokers to do business with us.” Even after just a few months in the job, Fedder’s passion for the broker industry has meant this role has become somewhat of a career highlight for him. “I’m really enjoying being part of an organisation that is so pro broker, where the whole organisation wants to see the broker channel and the direct channel succeed, together,” he says. Driven by that goal, one of Fedder’s biggest priorities is to continue building
“We gained an even deeper appreciation of how valuable the broker network is to our business, and the importance of the skills and expertise they bring” broker portal, Fedder says. This will be completed over two phases, with the first phase making it more user-friendly via mobile phone, adding a search function, and introducing more dynamic navigation features so that brokers can access what they need quickly and efficiently. While Suncorp’s turnaround times have moved up from bottom-third to top-third position when compared to those of other banks, Fedder says there is still more to do, and the bank is working on simplifying and improving its SLAs. Both Fedder and Suncorp CEO Clive van Horen have expressed their commitment to the broker channel, and ensuring there is no conflict between the bank’s direct and third party channels. “It’s important for brokers to know that
Suncorp’s relationship with its broker and aggregator partners, and to ultimately deliver better customer outcomes. Fedder says “consistency is key” to Suncorp’s mission to strengthen these relationships, emphasising that he is committed to a consistent policy to make processes easier for brokers and create a faster ‘time to yes’ mindset. He knows there is work to do, though, and says the bank is re-establishing trust with the industry. “Rebuilding this trust means being reliable, consistent and providing innovative solutions. We have been communicating this honestly to our network and will continue to transparently address some of the issues across our broker business,” Fedder says.
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FEATURES
COMMERCIAL LENDERS ROUNDTABLE
A LESSON ON RESILIENCE Commercial lenders and aggregator FAST gathered at MPA’s annual roundtable to talk about the state of the business landscape as it continues to recover from COVID-19, and what opportunities there are for mortgage brokers
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DESPITE OUR best intentions and planning, this year’s Commercial Lenders Roundtable was forced online for a second year thanks to the COVID-19 outbreak in Sydney. To use one of the most popular phrases of the last 12 months: we had to adapt. At this point of the pandemic, everyone knows the drill, and the participants were very accommodating when it came to making changes to the meeting format. Joining the virtual roundtable this year were Anita Hyde from NAB, John Mohnacheff from Liberty, Cory Bannister from La Trobe Financial, Malcolm Withers from Pepper Money, Danny Adams from Prime Capital, Jonathan Street from Thinktank, Robynne Frost from Suncorp, and Brendan Wright from FAST. While the format was similar to last year’s, the situation around it was not. Yes, we were back on Zoom, but there was much more confidence and certainty in terms of the commercial lending landscape. This meant that not only were more participants happy to take part, but they could provide a clearer picture of what they had experienced as well as what they expected to come. Businesses really suffered last year. Hospitality and tourism were particularly impacted as lockdowns meant people could no longer travel or, for much of the year, even go to the pub or out to a restaurant. Retail was also affected for a period as people were told to only leave their homes for essential items. But the commercial lenders said the retail space was in fact more positive than expected. In March 2020, retail spending had increased 8% from the month before as consumers panic-shopped; it then dropped by 17% in April to 9% lower than it was in the previous April. In May 2020, retail spending was almost 6% higher than the year before, and by July it was 12% higher year-on-year. Spending has mostly remained above pre-COVID levels ever since. Although businesses are continuing to be hit hard as parts of the country continue to go into lockdowns, the commercial lenders panel praised the resilience of Australian businesses, saying that they would be key to leading the country through its economic recovery. This also opens the door to greater opportunities for mortgage brokers. As consumer and business confidence grows, businesses will be looking to expand. Whether they will need more cash flow, larger office spaces, new retail locations or new equipment, mortgage brokers are perfectly suited to helping them find the right solutions. The panellists in the following discussion go into greater detail about the state of the commercial lending space, as well as about how they are supporting mortgage brokers who want to diversify and what the benefits are of doing so.
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FEATURES
COMMERCIAL LENDERS ROUNDTABLE THE PANELLISTS
Danny Adams Chief operating officer, Prime Capital
Cory Bannister Chief lending officer, La Trobe Financial
Robynne Frost Executive manager, broker partnerships, business banking, Suncorp
Anita Hyde Head of specialised and private, commercial broker, NAB
John Mohnacheff Group sales manager, Liberty
Jonathan Street CEO, Thinktank
Malcolm Withers Head of commercial, Pepper Money
Brendan Wright CEO, FAST
What have been some of the standout trends for you in the commercial lending space over the last year? The past 12 months have been full of ups and downs as Australia has continued to deal with the COVID-19 pandemic. Businesses in particular have been badly affected as lockdowns sporadically force them to close their doors and restrictions limit people’s movements. Noting that the last year had been interesting, La Trobe Financial’s chief lending officer, Cory Bannister, said the lockdowns had impacted business owners and investors, but subsequent government initiatives had “kept the industry on life support”. The challenges had placed extra pressure on brokers, he said, who then had to
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have tough conversations with borrowers to “explain the unexplainable”. Looking at how each area of the commercial space fared over the last year, Bannister said non-discretionary retail, hospitality and tourism are yet to fully recover, but light industrial and property construction demand have seen a real surge. Although offices were expected to suffer
with the workforce mostly moving to workfrom-home arrangements, he pointed to commercial real estate company JLL recently reporting almost $1bn in sales. “That was higher than what it was preCOVID, so it’s really interesting; the office market is still a bit of a mystery as to what’s going to happen there,” he said. “The jury is still out on the longer-term future of some of
“The way in which business has been able to respond to the challenges of the pandemic and the shifting nature of the economy has been quite noteworthy” Jonathan Street, Thinktank
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these assets and how they’re going to play out over the next two to three years. We continue to take a cautious approach but are somewhat optimistic about where it’s heading.” Calling it “an extraordinary story of resilience”, Thinktank CEO Jonathan Street agreed that the outlook for the office market was still an unknown, but retail had been much more resilient than people gave it credit for. With around 90% of Thinktank’s customers being self-employed, customer hardships peaked at 23% and are now back to preCOVID levels. “The way in which business has been able to respond to the challenges of the pandemic and the shifting nature of the economy has been quite noteworthy,” Street said. “It certainly was not expected as we stepped into the pandemic with the uncertainty that was in front of us. But, in particular, industrial property has remained so strong, [and] it continues to go from strength to strength.” As business owners have needed support and clarity over the last year, brokers have provided it. FAST CEO Brendan Wright said brokers had been an accessible voice of reason and trusted advisers who have helped clients “make sense of it all”. “Brokers being business owners themselves can have a relevant, empathetic and differentiating conversation with a client about what it means for them,” Wright said. “The thing that’s played out most predominantly is the role that brokers have played in helping clients get through their business challenges in the COVID environment.” Agreeing, NAB’s head of specialised and private, commercial broker, Anita Hyde, said commercial brokers had played a “pivotal role” between the bank and the customer, explaining the nuances of borrowers’ financial positions. Hyde said the resilience of the Australian business community had been the standout of the last year, and that commercial brokers
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“Brokers as business owners themselves can have a relevant, empathetic and differentiating conversation with a client about what [COVID’s impact] means for them” Brendan Wright, FAST would remain a good source of support for these businesses as they continued to grow with the opening up of the economy. She added that there were particular areas seeing more demand than others. “We’re seeing good levels of growth across industries, especially in regional locations that haven’t seen the impacts of COVID as significantly as the CBD locations,” Hyde
said. “The opportunity for commercial brokers in the regional areas, we’re really seeing that pick up, especially in equipment finance with regard to the instant asset write-off concessions. “That demand for managing cash flow will only increase; there’s a real opportunity there for brokers to step in and support customers further.”
NUMBER OF MORTGAGE BROKERS ALSO WRITING COMMERCIAL LOANS 5,000 4,500
4,486
4,539
4,000 3,500
3,668
3,000
3,481
3,670
2,932
2,500
2,647 2,374
2,000 1,500
3,617
1,673
1,641
1,000 500 0
Apr 15- Oct 15- Apr 16- Oct 16- Apr 17Sep 15 Mar 16 Sep 16 Mar 17 Sep 17
Oct 17- Apr 18- Oct 18- Apr 19- Oct 19- Apr 20Mar 18 Sep 18 Mar 19 Sep 19 Mar 20 Sep 20
Note: Graph shows commercial brokers as those mortgage brokers who wrote a commercial loan through their aggregator’s panel during the period. Mortgage brokers who solely wrote loans direct with lenders are not included. Source: MFAA Industry Intelligence Service, 11th Edition
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Redefining commercial finance
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We’re seeing growing numbers of mortgage brokers also writing commercial loans. Why do you think that is?
BROKER QUESTION
According to the twice-yearly figures from the MFAA, in the six months to September 2020 a record 4,539 mortgage brokers also wrote commercial loans. Starting off the discussion on what might account for this, Prime Capital’s chief operating officer, Danny Adams, called out the competitive residential market, along with the rising market share of brokers in the home loan space. “There are a lot of brokers out there, so if you want to try to maintain a competitive edge, then you have to diversify,” Adams said, pointing out that the increased competition was also contributing to the growing number of mortgage brokers choosing to expand into commercial loans. “Speaking from experience at Prime Capital, we came into existence 25 years ago to complement the large banks, with additional commercial lending products and increased options available to commercial borrowers. As more lenders and products become available, it gives borrowers more choice, but it also creates more need for a borrower to speak to a specialist to obtain a commercial loan.” The growing numbers also suggest that brokers are overcoming the myth of how complicated commercial lending is, said
Brendan Wright, FAST: Working with their aggregator and industry bodies to set up a training plan is important if [brokers are] serious about it for the long run. Depending on how hard they want to go after the opportunity and build the capability in their business, yes, there is training involved and required. As has already been mentioned today, the nature of the products that have been provided by lenders now really help brokers start that journey.
Q: How much training would brokers need to write commercial loans?
Malcolm Withers, Pepper Money: With the training, it’s about helping the broker realise what are they capable of doing. At Pepper we offer training and commercial workshops on everything from understanding commercial to understanding the differences between commercial and residential, to building your capability for having a conversation. We do sessions on real-life case studies, and even a simple ‘coffee with credit’, having a coffee with our credit managers and talking about how they look at a transaction. Cory Bannister, La Trobe Financial: I use the analogy that if someone says they want to be able to run 5k whenever they feel the urge, I would say, just do it – you don’t need to train for it. However, if someone said they wanted to run regularly, and maybe even run a marathon, I would strongly suggest they take the time to learn and train on how to do it so as not to get injured or find the experience painful. And this is the same for commercial lending: if you want to write one to two deals per month, you can get by through using non-banks like us; however, if you want to make it your core business, you will benefit from further training. Jonathan Street, Thinktank: It’s like progressing from high school to university – if you really want to go the whole way, then you choose which path you want to go on. There’s also ‘on-the-deal training’, where our relationship manager approach allows brokers to choose how much assistance they want with a transaction. We adapt to the individual broker and the transaction at hand.
“That demand for managing cash flow will only increase; there’s a real opportunity there for brokers to step in and support customers further” Anita Hyde, NAB Liberty group sales manager John Mohnacheff. As more and more mortgage brokers turn to commercial lending, Mohnacheff believes word is spreading that it is not as difficult to do as people think. “In fact, it’s as simple as doing a home loan – or even simpler,” he said.
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“Brokers are also realising there’s a lot of help on offer. With support from various lenders and large BDM forces who are ready to train them and assist, brokers don’t have to go it alone.” Overcoming those barriers also provides
brokers with the confidence that they are capable of stepping into the space. Pepper Money’s head of commercial, Malcolm Withers, said that if a mortgage broker could gather the information for a home loan from a self-employed customer, they would find commercial lending not that different. Part of Pepper’s training is designed to help brokers build that capability to have the conversations with their clients and create the kind of experience for them that would mean they wouldn’t lose those customers. Withers said it was not all about building skills but about helping brokers gain the
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COMMERCIAL PROPERTY SALES, YEAR TO MAY 2021 After consistent drops in the value of commercial property bought by businesses, April 2021 saw a sudden surge in sales, taking values to more than 50% up on the previous year and almost 28% higher than the month before.
Commercial property sales
+54%
Year-on-year change
8,000 7,000
$6,571 +13%
6,000 5000
$5,014
4000
$3,443 $3,196 $3,436 $3,523
3000 2000 1000 0
$4,407
$3,873 $4,373
$4,244
-35%
-5%
$4,798
-0.8% -0.9%
-0.9%
-0.8%
Jan 2021
Feb 2021
Mar 2021
-24%
-22% -53%
-7%
$4,849
$5,141
-32%
May Jun Jul Aug Sep Oct Nov Dec 2020 2020 2020 2020 2020 2020 2020 2020
Apr 2021
May 2021
Source: ABS Lending Indicators, May 2021
confidence they need to ask the right questions. He did warn, however, that different areas of commercial lending have different levels of complexity. “Certainly, there’s commercial business that is complex, and it’s tough,” Withers said. “But the vast majority of lending to small businesses, which are families, which are mums and dads – they’re really in the heart of a lot of what we’re seeing brokers step into, realising their capability levels are there so they can make the transition simply across to that commercial lending and smaller SME space.” The market over the last year has also resulted in many mortgage brokers being simply too busy with residential mortgages, so they are putting commercial deals on the backburner. Robynne Frost, Suncorp’s executive manager, broker partnerships, business banking, added that with the complexities of the last year brokers have needed the right skills to help businesses.
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She said that around 10% of Suncorp’s broker partners were qualified commercial brokers, and about 45% were mortgage brokers who were happy to stay in the residential space. She predicted that around 35% were already starting to diversify their offering. “At Suncorp, 40% of our residential customers are self-employed, so we see it as a huge opportunity for brokers to transition
around the business. What are you looking at in terms of expansion? What are some of your challenges? As business owners they want brokers to help them navigate all of that and make the switch easy.” While Wright agreed that for mortgage brokers it was a challenge to build a strong, consistent capability across mortgages, business lending, property investment, asset finance and so on, he said a lot of brokers were “waking up” to the idea of having a conversation about how to get those clients, and about partnering with others. “That network of brokers works together to keep the client with that broker but gets the need fulfilled in a different way,” he said. “That’s what’s changed significantly: knowing they can partner with another broker to get the client’s needs met – or they get serious and build the capability across all those streams.” The recent threat to broker remuneration has also been a catalyst for getting mortgage brokers to think more about diversifying. Bannister said that, with remuneration once again coming up for review, and given that a change, if any, is unlikely to impact the commercial remuneration model, brokers were again likely to turn their attention to commercial diversification. On top of this, he said the barriers to entry into the commercial lending space had opened up with the emergence of new
“There are a lot of brokers out there, so if you want to try to maintain a competitive edge, then you have to diversify” Danny Adams, Prime Capital into commercial lending by simply knowing your customer,” Frost said. “It’s important for brokers to expand their conversations with customers to understand more about their business and needs. Start by asking what’s happening
lenders, “whether that’s through the non-banks we see here today, but also fintechs as well, making it a lot easier to digest for brokers who haven’t written commercial before to at least get a handle on it”. “I think that’s complementary to the banks’
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offering as well, so that gets brokers into the space, gets them moving, and then they start to build out their capabilities further from there.”
Mortgage brokers have the perception that commercial lending is very labour and time intensive. How accurate is that? A passionate advocate for mortgage brokers diversifying, Mohnacheff said this perception was “a myth that must be debunked”. “We’re not talking about going out and tackling BHP funding or creating Rio Tinto’s international deals; we’re talking about smallto-medium enterprises,” he said, adding that anyone who could write a personal loan could write something like a car loan, and the support was there for anyone who needed it. “It might be office space, it might be a tilt slab, it might be a piece of equipment, it might even be a simple little utility – most small businesses have to buy something, and it’s not difficult. There is so much online training, there are BDMs, there are so many systems out there now where you simply follow the bouncing ball. Complete the application form and you’re 90% of the way there.” Having some familiarity with the mortgage broker’s point of view, Adams said he often spoke to them about writing commercial loans and saw the “fear setting in behind the eyeballs” at the prospect of having to understand business cash flow, balance sheets, and profit and loss statements. But he agreed with Mohnacheff that commercial lending could actually be very simple. He estimated that around 5% of commercial lending was based on cash flow, with much more of it based on secured lending. “Half of all of the lending in this market is secured by a residential property, which is the exact same asset class as these mortgage brokers have a lot of comfort dealing with in the first place,” Adams said. “It can actually be a lot easier to use this asset class and obtain a commercial loan. To turn the question on its head, I meet quite
“With support from various lenders and large BDM forces who are ready to train them and assist, brokers don’t have to go it alone” John Mohnacheff, Liberty BROKER QUESTION Q: What can mortgage brokers expect in terms of remuneration in commercial lending? Is it similar to residential commissions, for example with upfront, trail, clawback? Brendan Wright, FAST: They should alk to their aggregator. The reality is it’s pretty straightforward for lending solutions to the SME segment, as consistent as it is for mortgages. It’s circa 0.65 upfront and 0.15 on average for trail. Where it does get different, though, is when you move into large and complex solutions: for these types of deals, remuneration is negotiated on a case-by-case basis. Typically, for large deals there is a mix of mandate fee, upfront and trail – these will vary depending on the nature of the transaction, ROE for the lender and, most importantly, ensuring you deliver the right solution for the client with fair and competitive value. Malcolm Withers, Pepper Money: The only thing I’d add is that, on average across all lenders, you tend to find a slightly higher trail than they get on mortgages. It’s on par for upfront, but it’s higher trail on average. I’d ask a different question here: can you afford to lose remuneration by giving up an existing customer to another broker who offers commercial loans? Anita Hyde, NAB: When you get to the higher-end loans, it really comes back to how much the broker wants to be involved. Again, when you’re talking about ongoing annual reviews for some of those corporate transactions, there’s some brokers that say, I’m happy to be involved, I want to be involved in every single conversation and dialogue, and that plays a big part in what that remuneration looks like as well. John Mohnacheff, Liberty: The wonderful thing about commercial lending is that with the remuneration there’s enormous flexibility. If you’re doing a deal and say, you know what, I don’t want the upfront or the trail, we’ll adjust the rate. You can negotiate the terms, and I believe lenders on this panel would say, we’re open to that. Danny Adams, Prime Capital: It depends on the complexity of the transaction. With transactions that are very simple, there’s a speed element that’s needed, and so a small upfront fee is asked for, but if somebody is bringing a construction deal, they’ve helped put the feasibility together, I absolutely think that that broker should be charging a higher fee; they’ve worked very hard for it.
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a lot of commercial brokers that only deal with commercial, and they think that dealing with a residential loan would be a timeconsuming and complicated process.” Saying there was “no doubt” that mythbusting was required in this area, Wright agreed that commercial lending could be much more straightforward for a mortgage broker, particularly thanks to innovation in products, platforms and competition across lenders. He believes there is also a lot of opportunity for brokers who do want to step it up, expand their knowledge in the commercial space and differentiate themselves in the market. “As a broker who provides debt advice to business owners and meets their personal needs as well, that’s an enormous opportunity,” Wright said. “The reality is, it’s easier for an SME to get hold of a broker than it is to get hold of a banker. Don’t get me wrong; we need good
around and the amount of documents they’ll have to submit to get the deal to approval and settlement, it was horrendous,” he said, assuring the group that those banks weren’t present on the call. “Every lender on here does it very well in taking the myth away and making it easy for these brokers to get started,” he added. Withers said it was often difficult for some brokers to get accredited, and in response, NAB’s Hyde said the major bank worked with its aggregator partners to support any brokers who wanted to write commercial loans. “If there’s an aggregator that says, this is a broker that’s been an experienced business banker for 20-odd years, they should have commercial accreditation, we work really closely with them to make sure we can support that accreditation; it’s about having that dialogue with the aggregators,” she said. Being a smaller player, Suncorp invests a
“I think we’re all absolutely equipped to continue helping our brokers and small businesses grow in Australia” Robynne Frost, Suncorp bankers, and we’ll continue to need those, but that’s the fact. That’s the reason the mortgage broking industry grew so much: access to someone who can help [borrowers] out. “So, one, don’t be scared to get into it; two, there’s opportunity: build your capability to grow and do some amazing things in your business for other business owners.” Giving an example of a mortgage broker who recently wrote a commercial loan with Pepper, Withers said they had found it so much easier dealing with a non-bank than a bank. He believes banks are often what makes brokers think commercial lending is difficult. “Traditionally, they’ll refer it to a certain lender, and the amount of hurdles they make them jump through, the amount of running
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lot of time in making sure its bankers understand the broking industry. “Our organisation has a deep appreciation of how valuable the broker network is for our business, and the importance of the skills and expertise they bring to customers,” Frost said.
How are you supporting brokers who do want to diversify? It’s no surprise that, as a business that actively promotes diversification, Liberty provides support for those mortgage brokers who want to expand into other areas. Mohnacheff said brokers had “an obligation” to broaden their sphere, and Liberty in turn provided education and training. “Someone helped you start your business
and trained you and invested in you and worked with you to get you to the level you are now. I think there’s an obligation to continue on your journey of discovery and to grow your business and help other small businesses grow,” he said. “There’s a lot of people that will hold your hand all the way through. We’ve got about 17 BDMs across Australia dedicated to cash flow lending and commercial lending, and we’re running education and seminars at least every week.” Education and training is something NAB is doing as well, said Hyde. In the current environment the major bank is working closely with aggregators to make sure training can be done in a COVID-safe way. The bank is also focusing on how it supports female brokers in entering the commercial space. “We recently held a series of women in finance events and held a spotlight series on women in the commercial broking space for brokers, bankers and business leaders, just to really advocate the support network that is available for women looking to enter the commercial space,” Hyde said. “We all know that diversity brings a different train of thought, and the more diversity we can bring to the table, the more we can deliver greater outcomes for our customers.” Street said the support given over time by lenders, aggregators and the principal industry bodies had contributed to the growing number of mortgage brokers writing commercial loans. Thinktank itself works closely with brokers and aggregators to provide specific training suited to the broker. “We’re working with industry partners to deliver the right sort of training to the people who want it, rather than saying, here’s a training course, come along if you like; it’s ultimately up to the broker how far they want to go,” he said. “We can deliver really tailored training to them that supports what they’re after and takes them to the next level, and we step up the training and follow the pattern they prefer.”
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What are your expectations for the year ahead in the commercial space? At last year’s roundtable, just a few months into the COVID-19 pandemic, there was a general feeling that it was too hard to predict the following 12 months. This year, the group were a little more confident. Hyde said that after a challenging year in which businesses have had to look to innovation and new opportunities, the year ahead would see a “business-led economic recovery”. Technology and innovation would remain important, and NAB would continue to explore ways to simplify and digitalise its processes. “I think as the economic recovery continues and the vaccine rollout gains pace, the outlook is positive, and there are plenty of reasons for us to be optimistic for the future,” Hyde said. “We’re seeing a significant demand in new lending coming from commercial brokers, and we expect that to continue. NAB will be that banker behind the broker, so providing faster and simpler access is going to be critical to our path forward.” As the economy recovers, Thinktank anticipates a continued resurgence in commercial lending activity, along with larger loan sizes coming through. Agreeing with Hyde, Street also expects more innovation, which should lead to faster processes and turnaround times, as well as new lenders emerging and increasing competition. After the impacts of the pandemic, Thinktank is also preparing to see more alt-doc borrowers needing finance. “We’re expecting a lot of alternative verification whilst full-doc is a bit challenged with some interruption to financial results because of COVID,” Street said. “Mid-doc [loans] provide borrowers a quick solution, but they can transition to full-doc later on. There’s been a big pick-up in our experience there, and we expect that to continue to play out over the next 12 to 24 months.” Pointing to some of the challenges the
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BROKER QUESTION Q: What similarities/differences are there in the commercial lending space, for example when it comes to turnaround times, documents? Cory Bannister, La Trobe Financial: It’s the same process for us, whether it’s residential or commercial, so brokers can expect the same turnaround time. The only exception I would say is in development finance, which takes slightly longer because largely we’re waiting for more documentation from third parties, but generally, if it’s commercial, a simple transaction probably up to $15m, for us you can expect a similar process and turnaround to residential. Robynne Frost, Suncorp: The way Suncorp processes combination transactions for SMEs sets us apart from other lenders. Over 60% of Suncorp’s small business loans include home loan transactions, which allows us to assess these as one transaction via our SME credit assessment team. It means we can deliver a more streamlined experience for our brokers and customers. Jonathan Street, Thinktank: The valuation process is a little bit longer than for resi. Brokers who are new to commercial often get caught out by that. When you’re on a commercial transaction, getting started early on with the valuation, or at least engaging the right parties and the lender on it relative to timing for settlement, whether it’s a purchase or a refi, is a key thing to be on top of. Danny Adams, Prime Capital: In cases where the loan is very heavily focused on the assetbacking rather than a higher degree of servicing capacity, I’d expect the turnarounds to be significantly quicker. It’s very much market driven; I’ve yet to hear of a small business that’s said, don’t worry, I’ve got all the time in the world. They’re expecting to get decisions and answers much quicker. The other difference could be pricing, which is certainly going to be different.
“The vast majority of lending to small businesses, which are families, mum and dads, is at the heart of a lot of what we’re seeing brokers step into” Malcolm Withers, Pepper industry has faced with supply and cost pressures, Frost said cash flow was improving. She believes the economy is showing “great signs” of business and consumer confidence, and that an area seeing particular growth is the agricultural market. Overall, Frost is positive about the future.
“We’re pretty excited about the next couple of years,” she said. “Complementing what Jonathan said, we’re going to see some new lenders, and I think we’re all absolutely equipped to continue helping our brokers and small businesses grow in Australia.”
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SECTOR FOCUS: NEW BROKER
A new growth phase for mortgage broking As demand for home loans reaches record highs, consumers are turning to mortgage brokers more than ever before. With more opportunities for new broker recruits, the industry is making sure they can hit the ground running AROUND THE time of the Hayne royal commission into banking and financial services, the number of mortgage brokers being recruited into the industry dropped. That was unsurprising given that the mortgage broking industry was under a considerable spotlight, and it was unclear what it would look like once the final report came out.
says it is well known that the mortgage broking industry felt the full effects of the royal commission, but the demand for brokers now has never been higher. “For a long time there was less love to join our industry,” she says. “The lull in new brokers bottomed out around April last year, just as the global
“A heightened level of interest has attracted talent from a range of other industries to come and be a part of the new growth phase of mortgage broking” Susan Mitchell, Mortgage Choice But in 2020, the figures began climbing again. In the six months to September, there was a 50% increase in the number of brokers recruited compared to the six months before. This was right at the time that COVID-19 struck, when mortgage brokers also wrote a record 60% of all home loans. Mortgage Choice CEO Susan Mitchell
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pandemic took full effect. Significantly lower interest rates as well as government support led to a dramatic increase in availability of credit, and property markets began to soar. “The level of demand for mortgage brokers has never been higher in its 30-year history, and most of our franchise owners are struggling to keep up with the demand.
This heightened level of interest has attracted talent from a range of other industries to come and be a part of the new growth phase of mortgage broking.”
Demand grows for channel of choice Echoing those views, Specialist Finance Group aggregation manager Blake Buchanan says the industry is witnessing the highest numbers of bankers becoming brokers in recent memory. He puts this down to bankers seeing that the third party channel is the “clear channel of choice for consumers”, as well as to the introduction of the best interests duty, along with the superior access brokers have to various lending products, and the freedom they have to operate their own businesses. COVID-19 would also have allowed would-be brokers the extra time to plan their businesses and complete the relevant coursework. “With broker market share increasing, COVID driving up the number of transactions, and awful SLAs negating some efficiency, there is a present need for more brokers,” Buchanan says, but he adds that
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he does not necessarily think the number of new recruits will go up. “I think we are moving through the peak of volumes at the moment, and as SLA matters are resolved and the seasonal decline for EOFY arrives, we will see brokers come back to comfort levels, meaning that the current broker levels will be maintained at present levels for the short to mid term.” Pointing to the amazing service that brokers offer customers, in terms of the education and guidance they provide, 86 400 home lending lead Melissa Christy says it’s no wonder the industry continues to grow. But it’s no secret that new-to-industry brokers face some tough challenges when they first start out. As a lender, 86 400 is aware that brokers who are new to the business will need to learn new systems, understand numerous lenders and their products, and absorb a lot of different information. “Brokers may need guidance if they’re working through an application and an unforeseeable event appears; in this case they can work with their BDM to create a solution for the customer,” says Christy. 86 400 has BDMs in every state, operating both through digital channels and in person to keep the smartbank’s broker networks up to date on the latest news, highlights, accreditations and processes.
“With simpler digital application methods, and rates at an all-time low, it is a great opportunity for brokers to work in an industry that is always changing” Melissa Christy, 86 400 It also runs online training days and provides online resources such as step-bystep guides and serviceability calculators. Christy encourages existing brokers to share their own experiences as new brokers come into the business. “It’s important that they understand the basics and are constantly providing a great customer experience,” she says. “Experienced brokers have seen several scenarios, and it is essential they take up any opportunity to educate their new brokers on a deal they are working on.”
Support for new broking businesses Starting a new business in itself comes with challenges, like where to begin when it comes to bringing in customers. Mortgage Choice boasts 30 years of helping brokers run successful small businesses, and provides support with marketing,
sales, technology, credit skills and business management. Mitchell says that while the level of business for mortgage brokers has never been higher, the amount of support required to capture the opportunity is significant. “We know how to build your customer base and market your brand; we can teach you to plan for scale and how to break through in a competitive environment and build market share by ensuring that you have access to the full range of support required to be successful in this industry,” Mitchell says. With more leads and more consumers coming through the door than ever before, Mitchell says Mortgage Choice is seeing franchisees recognise that now is the time to recruit new broking staff. In recent months, the aggregator has seen an increase in enquiries to the HR team about how to
NUMBER OF BROKERS RECRUITED, BY GENDER Apr 15– Sep 15
Oct 15– Mar 16
Apr 16– Sep 16
Oct 16– Mar 17
Apr 17– Sep 17
Oct 17– Mar 18
Apr 18– Sep 18
Oct 18– Mar 19
Apr 19– Sep 19
Oct 19– Mar 20
Apr 20– Sep 20
Number of men recruited during period
931
972
947
938
1,168
892
854
625
630
665
992
Number of women recruited during period
475
454
439
360
523
406
371
313
281
268
412
Source: MFAA Industry Intelligence Service, 11th Edition
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FEATURES
SECTOR FOCUS: NEW BROKER
create more targeted job ads or campaigns to find stronger talent. “In this environment there will be a quicker return on the investment in staff, so grab the opportunity to scale up while it lasts,” she says to experienced brokers who are considering hiring. “We have found a lot of success in recruiting new brokers with little to no industry experience that have come from service industries. The ability to delight clients is an absolute must for a new broker, and there are experienced operators in this space in a range of industries outside of finance.”
Opportunities abound Saying that the first two years are always the hardest, Buchanan adds that new brokers need resilience, and the ability to invest in your business is crucial. Finding the right mentor is also really important; he says a new broker should be prepared to invest in a great
RECRUITING FEMALE BROKERS The number of female brokers in the industry remains behind the number of males. In the six months to March 2019, a record proportion of 33% females were recruited as brokers, but since then the numbers have continued to drop, falling by 29% in the six months to September 2020. Specialist Finance Group’s aggregation manager Blake Buchanan says SFG has some outstanding women, including its top two national performers in recent months. He says the group actively supports and encourages anyone who is the right person for the industry, regardless of gender, but adds that broking is “excellently matched” to women in business. “Broking is not a nine-to-five job, and there is no pay gap to speak of, which fosters a flexible and rewarding environment,” he says. Last year Mortgage Choice took steps to identify the gaps in female representation and found that women represented one in three of its loan writers and one in four of its franchise owners. With about 80% of the aggregator’s female staff in administration and marketing roles, CEO Susan Mitchell says there is a real opportunity to show them what it’s possible to achieve as a mortgage broker. The group launched its Aspire program in which it hosts a series of masterclasses and events, connecting up-and-coming brokers with high-performing female franchise owners. “Aspire celebrates our female role models and nurtures the emerging talent and next generation of female franchise owners in our network,” Mitchell explains.
“With broker market share increasing, COVID driving up the number of transactions and awful SLAs negating some efficiency, there is a present need for more brokers” Blake Buchanan, Specialist Finance Group mentor who can review and approve files before submission. “A mentor who can assist with business structuring, marketing and other crucial areas of business is a big plus,” Buchanan says. Specialist Finance Group does “deep dives” with new brokers when they first join and then aligns them with an existing group so they can learn the ropes and write volumes sooner. “If I were starting out today, one of the very first things I would do is establish or
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join a network of like-minded professional industry people and learn as much as I can from them,” he says. Moving forward, Buchanan says there continue to be opportunities for those who choose to make the most of them. “This industry is about high standards, commitment, consistency, hard work and a lot of resilience,” he says. “If you have those attributes, among others, with an unwavering desire to help people, then you will find opportunity abounds in this industry.”
While new-to-industry brokers do have certain challenges to face, Christy assures them that there is plenty of support out there, from BDMs to broker support teams and the lenders themselves. “Customer loans can be complex, but as long as you communicate what is happening to all parties involved, then a solution can be found to ensure it all goes smoothly up until settlement,” she says. Observing the market’s need for mortgage brokers, as well as 86 400’s own plans to work with more aggregators, Christy says she expects the industry to keep growing. “Based on our numbers, and with 86 400 looking to pick up more aggregators, it is likely the number of brokers in Australia will increase. With simpler digital application methods, and with rates at an all-time low, it is a great opportunity for brokers to work in an industry that is always changing,” she says.
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THIS DECEMBER, DECEMBER, MPA will be celebrating 20 years since the first issue of Mortgage Professional Australia hit desks. To commemorate this anniversary, this special feature takes a look back at some of the biggest stories in the mortgage and finance industry during that time. Starting with a snapshot of the hot topics of 2002, MPA MPA’s ’s first full year of publication, the following pages should stir up some memories for those of you who have been in the industry long enough. While there have of course been a lot of changes over the last 20 years, some news trends are eerily familiar. Back in 2002, MPA was already talking about broker market
share, though it was nowhere near the highs reached today. Broker association FBAA was in the news, but the MFAA did not yet exist in its current form. There were banks leaving the broker space that we still talk about today because they are now back in business. Regulation has remained a huge talking point over the years. In 2003 the government was discussing its proposed national uniform regulation of the mortgage industry. Over the last two decades, there have certainly been plenty of hills to climb for brokers, but recent years have been particularly eventful. With increasing and changing regulation, on top of the Sedgwick review, the Productivity Commission and the banking
royal commission – not to mention the emergence of a global pandemic – there was plenty of content to choose from for this feature. But there have been good times too, which are highlighted in our photo spread of the Australian Mortgage Awards. Thank you to everyone in the industry for following MPA over the last 20 years, including the readers who take part in our surveys, engage with MPA online, and read and comment on the magazine’s features. Also, thank you to the businesses that give us their time for interviews and support the magazine every month. The team at MPA hope you enjoy looking back over the decades in this anniversary feature.
www.mpamagazine.com.au
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MPA THROUGH THE YEARS
2001-2021
2001
2004
2005
2006
2008
ISSUE 1 The launch issue is released in December 2001 under the name Australian Mortgage Professional. Broker market share hitting 44% is front-page news.
ISSUE 4.01 Renamed Mortgage Professional Australia (MPA), the first issue of 2004 features stories on how high interest rates could go and how to avoid loan fraud.
ISSUE 5.O6 The annual ‘Super Brokers’ edition reveals the best brokerages in the industry; it also discusses churn and how brokers can target older borrowers.
ISSUE 6.11 With a primary focus on diversification, this issue highlights the problems refinancing delays are creating for brokers, and how to sell a loan book.
ISSUE 8.06 Featuring the annual Brokers on Banks survey results, MPA also looks at opportunities for brokers in selling insurance, and at how they can become business owners.
2013
2014
2016
2017
ISSUE 13.3 Some of the familiar names of today appear in the 2013 Young Guns line-up, and ME Bank explains to MPA how it’s taking on the big four 16 months after embracing the broker channel.
ISSUE 14.06 MPA holds the first of many roundtables, and non-major banks step up to the microphone to talk about why mortgage brokers should give them a go.
ISSUE 16.01 Highlighting the “kings and queens” of the industry in 2015, this issue also focuses on big topics such as global clients and new lenders in the market.
ISSUE 17.03 Covering the important relationship between broking and technology, MPA also looks at the restrictions on Chinese buyers and an LJ Hooker Home Loans revamp.
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2009
2010
2011
2012
ISSUE 9.12 MPA celebrates the year’s Top 100 Brokers, gives tips for stepping up cybersecurity, and discusses government plans to help boost the RMBS scheme.
ISSUE 10.02 Talk of a new aggregator ‘super group’ emerges. MPA also looks at competition after the GFC, and at NAB’s plans to offer mortgages online.
ISSUE 11.09 The results of the Brokers on Non-Banks survey are revealed. This year, MPA also celebrates its 10th anniversary with a special edition.
ISSUE 12.02 ASIC blasts brokers’ handling of low-doc borrowing, and industry leaders predict what the next 12 months will hold, pointing to technology, regulation and interest rate cuts.
2018
2019
2020
2021
ISSUE 18.09 Anja Pannek stars on the front cover of MPA’s first diversity and inclusion issue, which also features profiles of some of the industry’s incredible influencers of change.
ISSUE 19.05 MPA’s annual commercial lending issue includes a ‘Big Interview’ with Angelo Manos, an in-depth guide to commercial lending, and the year’s Top 10 Commercial Brokers.
ISSUE 20.08 In the year of the COVID-19 pandemic, this issue features one of several virtual panel discussions to come, this time on the topic of commercial lending.
ISSUE 21.04 The non-major banks gather for a roundtable discussion in an issue that also covers property investors, asset finance, and the industry’s efforts to attract more women to broking.
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2002
WORLD EVENTS • Spiderman, The Lord of the Rings: The Two Towers and Star Wars Episode II are the biggest cinema releases • The Queen Mother dies • Ansett Australia ceases all operations
2002 average home price
$219,250
MPA ARCHIVES
Mortgage brokers write record 44% of home loans BROKERS
ARE
rapidly growing their share of the mortgage market, with an increase of 12% in loans written during the second quarter, according to a new study. Research conducted by the Market Intelligence Strategy Centre shows brokers settled more than $7bn in new home loans in the quarter to June 2001. Brokers wrote 44% of the loans settled by regional banks, building societies and credit unions, indicating that borrowers are
increasingly likely to use a broker rather than approach their bank. Steve Sampson, general manager of Choice Home Loans, said this trend was likely to continue, as customers wanted their brokers to shop around for them. He added that business at Choice Home Loans had increased by about 30% during the past six months, and the large majority had been home loans for mum-and-dad borrowers. “Who knows where it’s going?” he said. Jim L’Estrange, Westpac consumer banking manager, said brokers wrote about 25% of the bank’s mortgage business – and this had increased in the past two to three years.
Aussie goes for broke with new mortgage adviser service AUSTRALIA’S L A R G E S T non-bank lender, John Symond’s Aussie Group, has launched a new national mortgage broking service, Aussie Mortgage Market, supported by a $12m marketing budget and an eightmonth national media advertising campaign. Symonds said the new service had created 200 additional jobs within the group. “Following a major recruitment and training program, Aussie has deployed more than 300 accredited, full-time mortgage advisers to meet the home loan needs of customers in all capital cities and major regional centres across Australia,” he said. Aussie’s mortgage advisers will represent
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14 home loan brands, including all four major banks, while also offering Aussie Home Loans products. The Aussie products will be compared with those available from the new panel of lenders without being given any advantage. Symonds said the growth of the mortgage broking industry, which now represents about 30% of new home loans in Australia, had been marred by the practices of unethical individuals. “We plan to clean up the industry by raising service standards through proper accreditation, greater transparency and better training of our advisers, many of whom have long experience in the finance industry,” he said. “We intend to make secret commissions and undisclosed incentives in the industry a thing of the past.”
Brokers say resounding yes to MIAA-FBAA merger THE FBAA and the Mortgage Industry Association of Australia (MIAA) should merge to form one organisation representing the interests of the mortgage community across Australia, a survey conducted by PLAN Australia has revealed. According to the survey, 64% of PLAN members – incorporating a good crosssection of the Australian broker community – believe the associations should merge to become one body. The survey also revealed that 27% of the respondents said the two organisations should work together on key issues, even if they remained independent. Nine per cent had no opinion on the matter, and none thought the MIAA and FBAA should continue to be separate organisations. PLAN Australia managing director Alex Moulieris commented that it was a waste of resources to have two organisations pursuing the same goals. Update: The merger never took place; the MIAA turned into the MFAA.
MORTGAGE EVENTS • Australian Mortgage Professional (later rebranded as MPA) is officially launched after the first issue lands on desks in December 2001 • Calls for non-conforming self-regulation • PLAN/Westpac launch online applications
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2003
WORLD EVENTS • Space shuttle Columbia disintegrates, killing all seven astronauts on board • The second Gulf War starts • England defeats Australia 20–17 in the Rugby Union World Cup final
2003 average home price
$263,625
MPA ARCHIVES
ASIC plans enforcement action as Online loan applications on report damns unethical brokers the rise
SOME COMMISSION-DRIVEN mortgage and
finance brokers are using unfair tactics to charge consumers excessive fees while selling them unsuitable loan products, according to a new report into finance and mortgage broking in Australia. The report, commissioned by ASIC and completed by the Consumer Credit Legal Centre, reveals how consumers suffer – or even lose their homes – because the law has failed to keep up with the growth of mortgage broking. It says the fragmented structure of mortgage and finance broking is inhibiting the development and maintenance
of professional standards in the industry and that the Mortgage Industry Ombudsman Scheme cannot deal with all complaints. Continuing, it states that legislation now before the NSW Parliament does not fully tackle industry problems. ASIC’s executive director of consumer protection Peter Kell said the commission was planning enforcement action against several mortgage industry players in the wake of the report. He said standards needed to improve in order to reduce risks to consumers. “It’s pleasing that there is wide acceptance in the industry that this is the case.”
Government backs proposed regulation of mortgage brokers THE FEDERAL government has said it will strongly back moves to introduce national uniform regulation of the mortgage industry. Responding to ASIC’s release of a Consumer Credit Legal Centre report into mortgage and finance broking, the Parliamentary Secretary to the Treasurer, Senator Ian Campbell, said the Commonwealth strongly supported calls for the regulation of brokers. The announcement came on the eve of the Australian Mortgage Summit, where both mortgage brokers and industry leaders came together to debate important issues
– including regulation – at the Royal Pines Resort on the Gold Coast. Senator Campbell, who oversees ASIC, said mortgage broking was a rapidly growing industry in which consumers deserved to have the protection of a high-quality regulatory regime. “This is a matter within the powers of the states and territories to address,” he said. “The Commonwealth is prepared to play a facilitator role through the Ministerial Council on Consumer Affairs to develop nationally uniform legislation.”
“The Commonwealth is prepared to play a facilitator role through the Ministerial Council on Consumer Affairs to develop nationally uniform legislation” Ian Campbell, Parliamentary Secretary to the Treasurer 36
WESTPAC’S ACCREDITED mortgage brokers are continuing their love affair with the bank’s online loan application systems, with 50% of mortgage applications now being processed electronically. The ease of use of the bank’s new mobile mortgage application system is helping deliver reduced reworks and faster turnarounds, according to Westpac head of broker origination Brad Rockwell.
60,412
mortgage applications per month
66%
of homes have computers
53%
of homes have internet
MORTGAGE EVENTS • Brokers break $10bn monthly home loans barrier • Council of Mortgage Lenders formed • AFG, Mortgage Choice and Aussie are top three in first Superbroker poll
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2004
WORLD EVENTS • Riots in Redfern, NSW, follow death of TJ Hickey • Terrorist attack in Madrid, Spain, kills 191 • Facebook is founded • Huge tsunami causes mass devastation in Asia
2004 average home price
$306,125
MPA ARCHIVES
Brokers soon to be subject to MIAA expulsion powers BROKERS COULD soon be shown the door by the Mortgage Industry Association of Australia (MIAA) if the ACCC authorises the association’s Disciplinary Rules. Such a move would allow the MIAA to discipline and, if necessary, expel mortgage brokers without fear of legal repercussions for alleged anti-competitive behaviour. And ACCC deputy chairperson Louise Sylvan said the commission was likely to grant the authorisation. “In its draft determination, the ACCC found that the MIAA’s Disciplinary Rules are unlikely to restrict competition in the
mortgage broking industry,” Sylvan said. “The ACCC considers that the MIAA’s governance regime, which the Disciplinary Rules enforce, is likely to assist member mortgage brokers in acting ethically and professionally in the industry, therefore resulting in a benefit to the public,” she added. However, Sylvan said the ACCC had noted the concerns raised by some interested parties that the MIAA governance regime had never been subject to an external review, and that decisions on a member’s conduct made by the tribunal were not automatically publicly available.
Industry regulation at least two years away, says law firm
MORTGAGE BROKERS are unlikely to see nationally consistent regulation of the industry in force until at least late 2006 or early 2007, according to Gadens Lawyers partner Jon Denovan. However, a public consultation process on proposals for regulation of the industry is now expected to start by December this year. Queensland’s Fair Trading Minister Margaret Keech said the state was prepared to introduce its own mortgage and finance broker laws if national, state-based laws took too long to implement.
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The minister’s comments came as the Ministerial Council on Consumer Affairs met to announce that it would release a regulatory impact statement on proposed regulation of the mortgage and finance broking industries. The discussion paper was expected to be released in August but has been put back until October. Denovan said the industry could expect to see a consultation process start in November/December. Meanwhile, WA’s Minister for Consumer and Employment Protection, John Kobelke, said he was concerned about the lack of consistent national regulation for mortgage and finance brokers. “It would be quicker if the Howard government took on the responsibility, but so far it has ignored requests to do so,” Kobelke said.
GE Money buys out AFIG, Wizard Home Loans in $500m deal GE MONEY’S $500m buyout of Australian Financial Investments Group (AFIG) will be a driver of further consolidation of the mortgage broker channel, says one market analyst. Martin North, a consulting director at Fujitsu Australia, said the acquisition was another example of the industry evolving from a fragmented, disparate range of players into non-bank lenders, brokers and brokerages aligned with much larger groups. GE Money chief executive Tom Gentile said the company was taking a long-term view of the mortgage sector in Australia. He denied suggestions that the global giant had bought AFIG at the peak of the market. “I think the market peaked last year and went through a very ordinary movement towards a plateau, and, in any case, we’re looking at how it will perform over the next 10–15 years,” Gentile said. Gentile announced the company’s acquisition of AFIG, Wizard Home Loans and Australian Mortgage Securities for an undisclosed amount, which market sources believe to be around $500m. Wizard’s founder and executive chairman Mark Bouris will remain with the company as a non-executive chairman and assist with the integration of the company into GE Money.
MORTGAGE EVENTS • MIAA expels first mortgage broker • Broker regulation centre stage in federal election • Homeside is brokers’ Bank of the Year; Macquarie and ANZ complete top three
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2005
WORLD EVENTS • • • •
Pope John Paul II dies Terrorist attack in London kills 52 Hurricane Katrina wreaks havoc in the US Bali bombings kill 26
2005 average home price
$319,125
MPA ARCHIVES
Draft proposals for regulating brokers spark concern
AUSTRALIAN MORTGAGE and finance brokers have just over a month to comment on proposals for national uniform regulation of mortgage and finance brokers. The long-awaited draft proposals for national regulation were released in early December to start the public consultation process towards new state-based legislation governing the mortgage and finance broking industries.
Industry experts believe that if the recommendations contained in the report are implemented in full, there will be a period of consolidation as smaller industry players join larger groups to take advantage of compliance systems and procedures. However, the draft proposals have already raised the ire of some sectors – particularly chattel and lease brokers – who say that regulations designed to cover mortgages and other kinds of finance are not suitable for commercial leasing. FBAA special projects manager Maurie Unwin said up to 50% of its members – who are chattel and lease brokers – could be severely impacted by the regulations, which are geared more towards commercial and mortgage lending than leasing finance.
Virgin Money gets set for mortgage assault on Aussie market
AUSTRALIAN MORTGAGE brokers are bracing for even more competition in an alreadycrowded market as one of the world’s most wellknown brands prepares to roll out mortgage products into the Australian marketplace. Virgin group chairman Richard Branson recently announced that he expected Virgin’s fully owned subsidiary, Virgin Money, to begin distributing mortgages in Australia within the next 12 months. He said the company planned to eventually bundle loans with its
recently launched superannuation and credit card products. Branson said Virgin was planning to go head-to-head with rival mortgage market brands, including Wizard and Aussie Home Loans, to secure a significant market share. Aussie Home Loans spokesman Tim Allerton said the company had no comment on the Virgin proposals. Wizard chairman Mark Bouris said Virgin had left its entry into the Australian mortgage market too late – coming at the back end of the recent mortgage boom. However, he also said of Virgin’s entry into mortgages: “Bring it on!” If Branson’s track record in mortgages in the UK is anything to go by, the Australian market looks set for an aggressive new competitor.
Rebranding marks 25 years in business for key lender TONTO HOME LOANS has undergone a rebranding under the FirstMac name to become FirstMac Mortgage Management Limited. This change affects a number of the companies in the FirstMac Group, including National Limited, Nationale Equity, First Mortgage Company, Queensland State Home Loans and Tonto Home Loans. FirstMac Mortgage Management Limited chief executive Kim Cannon said the rebranding under one name would give the company substantial power in the international investment community. “We sell bonds and negotiate with local and international banks to provide the mortgages for our customers, and also in the Australian home loans market with pricing leverage we can pass on to our customers,” Cannon said. Brokers from the former Tonto Home Loans will have the opportunity to expand their businesses into origination services through the new FirstMac company. “We are seeing the convergence of brokers and originators, and we want to give both groups the opportunity to substantially expand their businesses,” Cannon said.
MORTGAGE EVENTS • St. George Bank reinstates trail commission on refinances • Non-conforming arrears hit record highs • Collins Securities, Homeloan Services and AFM top MPA’s Brokers on Non-Banks poll
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2006
WORLD EVENTS • Huge earthquake in Java, Indonesia, kills thousands • Saddam Hussein is executed • Australia hosts Commonwealth Games in Melbourne • Google buys YouTube a year after its launch
2006 median home price
$306,125
MPA ARCHIVES
General Motors looking to rev up mortgage funding GENERAL MOTORS A C C E P TA N C E CORP (GMAC) is said to be making plans to open a mortgage funding business in Australia next year. The company could be setting up shop as soon as the first quarter of 2006. Neil Sinden, head of GMAC’s mortgage funding business in Australia, told a recent conference organised by Insto magazine that Australia was one market it had under “consideration”. However, rumours in the
industry point to more than just consideration as plans seem more advanced for the company to kick off early in the new year. If GMAC does enter the mortgage market as a wholesale funder, it will be in competition with the likes of GE Money and Macquarie PUMA. Already GMAC manages around US$33bn in mortgages in the US. One source said, “His [Neil Sinden] presentation alluded to the fact they were putting things together, and I wouldn’t be surprised if there is a big announcement made very soon. They seem to have been watching the market for some time and have now decided it’s the best time to join in.”
Reserve Bank issues warning about interest-only loans THE RESERVE BANK OF AUSTRALIA expressed surprise recently at the rise in the number of borrowers choosing interest-only home loans, warning of the possibility of increased negative equity in property markets where prices are continuing to fall. Interest-only home loans account for almost a third of the loan market, with 60% of investors and 15% of owners not required to repay any of the principal amount for up to 15 years. In its September 2006 Financial Stability Review, the RBA said borrowers with interestonly home loans were most at risk of falling into the negative equity trap, where the size of the debt exceeds the value of their property. “With a principal and interest loan, a borrower making scheduled repayments would typically pay off about 10% of the loan’s principal over the first five years, establishing a buffer against a fall in house prices,” the RBA said.
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“With a principal and interest loan, a borrower [could] pay off about 10% of the loan’s principal over the first five years, establishing a buffer against a fall in house prices” Reserve Bank of Australia
Debt agency calls for national mortgage default register MORTGAGE DEFAULTS should be recorded on one central national register to provide a better gauge of economic and housing market conditions, a major debt collection agency has said. Roger Mendelson, CEO of Melbournebased Prushka, said economic forecasting would be more accurate if a default register was set up in Australia. He said the number of house repossessions was rising, although gaining accurate numbers was currently impossible. “There’s a trend, but there’s no measure as to what it is,” Mendelson said. Prushka, which services 30,000 customers nationally, has witnessed many repossessions first-hand. Mendelson said lenders often pursued repossessions only after Prushka had lodged bankruptcy proceedings against the homeowner, meaning the firm would often lose any hope of recovering the debts it was chasing. A central register could become a barometer of the property market’s health, Mendelson said, which would have been useful ahead of Australia’s previous recession in the early 1990s when the media and the Reserve Bank took up to 18 months to work out that mortgage defaults were out of control.
MORTGAGE EVENTS • CBA acquires remaining 49% stake in Colonial National Bank • First home buyers struggle to enter housing market • GMAC-RFC enters Australian market
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2007
WORLD EVENTS • Live Earth benefit concerts held around the world • Final book in Harry Potter series is released and becomes fastest-selling book in history • Kevin Rudd is Australia’s new Prime Minister
2007 average home price
$382,250
MPA ARCHIVES
Waning average mortgage size signals buyer caution – AFG MORTGAGE SIZES declined for the first time in 12 months in October 2006, dropping below $300,000, according to aggregation group AFG. The AFG Mortgage Index showed the national average mortgage size fell from $307,000 in September to $299,000 in October. The last time the average mortgage was under $300,000 was six months prior, in April 2006. AFG reported that the 2.6% drop in the national average reflected declines in the average loan amount of 9% in Victoria and
8% in WA. The average mortgage in WA in October was $314,000, down sharply from the September figure of $341,000. “Worries about rate rises are eroding the confidence of buyers across the country, and for the first time we’re even seeing signals of caution in WA,” said Malcolm Watkins, executive director of AFG. “When you see WA slow just on the threat of one rate rise, it makes me even more concerned about the potential impact in other states.”
“Worries about rate rises are eroding the confidence of buyers across the country” Malcolm Watkins, AFG
HSBC exits broker market in favour of non-bank FirstMac
THE RECENT sale of HSBC Bank Australia’s $2.26bn broker-originated mortgage book to non-bank lender FirstMac was the result of poorer than expected returns and a desire to build longer-term ties with its customers by selling them a greater array of products, according to a statement from HSBC. But some aggregators, including FirstMac competitor AFG, said they remained in the dark about who would control their customers
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after the deal was finalised in February. “I’m looking for them to give me some details on what happens to these customers if they vary a loan in the future, or switch products,” said Kevin Matthews, director at AFG, which has HSBC on its panel. “Does that mean they just twist off our book and end up on FirstMac’s? We really need to know what the rules are,” said Matthews. While Matthews said HSBC had given AFG prior warning about the sale, he believed it was presumptuous of the bank to assume that AFG would deal with fellow mortgage manager and competitor FirstMac. While such a move could not be ruled out, he said it was wrong for the bank to assume it would happen automatically.
Fat margins made building non-bank fun, says RAMS chief RAMS FOUNDER John Kinghorn said he had plenty of fun building up the non-bank, but it would cost someone at least $100m to do the same thing in today’s more competitive market. RAMS, which is due to list on the ASX in late July for around $885m, began operating at a time when margins were large enough for Kinghorn to make mistakes. “When you’ve got a 4% spread, you can be awfully inefficient,” Kinghorn said in an interview with the Australian Financial Review in June. “Seriously, you couldn’t do it today … someone could try, but it would probably cost them $100m to start it.” Kinghorn established RAMS in 1991 in an attempt to take on the big banks, and was one of the pioneers in the industry, following in the footsteps of John Symond from Aussie Home Loans. Before founding RAMS, Kinghorn’s own finance group, Allco – which he started in 1979 – was busy securitising big-ticket government assets and aircraft leases.
MORTGAGE EVENTS • NAB launches NAB Broker • Half a million Australian households in mortgage stress • US subprime credit crisis begins, leading to financial crisis • Challenger buys Choice and parts of FAST and PLAN
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2008
WORLD EVENTS • PM Kevin Rudd apologises to Indigenous Australians • Earthquake in southwest China kills thousands • Lehman Brothers files for bankruptcy protection
2008 average home price
$417,125
MPA ARCHIVES
MFAA ready to take a stand on overregulation of broking
SIX YEARS in the making, federal regulation in the mortgage broking industry is – relatively speaking – just around the corner. When MPA’s Tim Neary caught up with Phil Naylor, CEO of the MFAA, at the end of June, the closing date (1 July) for submissions on the Commonwealth government’s Green Paper on Financial Services and Credit Reform was imminent.
Since most of the work has already been done by the NSW government in its draft bill released in November last year, Naylor expects that the content of the legislation will be complete by 2009 – a good thing for the industry, he believes, since it will increase consumer and lender confidence in the broker sector. One caveat, though: the MFAA is against overregulation of the industry, and where proposed legislation might impede the broking business, the association is unafraid to oppose it. These are not empty promises. Already the MFAA is opposed to two clauses in the draft legislation and has made its submission in this regard.
CBA-Aussie acquisition deal threatens an ‘erosion of choice’ REFUND HOME LOANS boss Wayne Ormond has expressed dismay at Commonwealth Bank’s acquisition of a 33% stake in Aussie Home Loans. Ormond said in a press release that it was regrettable to see the recent demise of a number of smaller mortgage brokers, and more so for a market-leading broker to lose its independence and join those controlled by the banks. “John Symond was a pioneer in providing greater choice of funding for homebuyers, and it is to be hoped that this move does not represent a further erosion of the choice available to homebuyers,” Ormond said, adding that “homebuyers should realise that there are many other home loan products available on the market”. Both Refund and Aussie offer CBA products.
Home loan repayments could jump by 50%, says property group PROPERTY GROUP Raine & Horne has warned that large numbers of Australian homeowners face the prospect of 50% increases in their mortgage repayments in 2008. “The Reserve Bank has increased interest rates eight times since 2005, of which borrowers locked into fixed rate loans have been immune to until now,” said Angus Raine, CEO of Raine & Horne. “However, this year, 30% of Australians with mortgages will shift from fixed interest rates at around 6% to standard variable interest rates nudging 9%. “They’ll basically face the prospect of three years’ worth of interest rate hikes, and this will rock many household budgets,” Raine said. Gary Lees, general manager of Raine & Horne Financial Services – the mortgage broking arm of Raine & Horne – agreed. “On a 25-year interest-only mortgage of $350,000 at 6%, a homeowner will be making monthly repayments of around $1,750,” he said. If the rate jumps to 9%, the monthly repayment will be $2,625. This is a significant increase of $875 or 50%.”
MORTGAGE EVENTS • Westpac buys RAMS Home Loans, BankSA and merges with St. George • Commonwealth Bank acquires 33% stake in Aussie – which had recently acquired Wizard Home Loans – and buys Bankwest
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2009
WORLD EVENTS
2009 average home price • Barack Obama becomes first African-American President of the US • Michael Jackson dies • G20 Summit meets in London • Slumdog Millionaire is best picture at the Oscars
$417,250
MPA ARCHIVES
ACCC concerned about market dominance of major banks
GROWING CONCENTRATION in the banking sector has raised concerns with the ACCC boss. A new report has shown that the big four may now be overshadowed by the big two. Research by Brand Management found that CBA/Bankwest and Westpac/St. George Bank took a combined 85% of mortgage growth in the March quarter. CBA/Bankwest raked in $22.7bn of the $26.6bn growth in mortgage books, or 56% of the mortgage pie for that quarter. Westpac/St. George took $7.7bn of the growth. The combined growth of ANZ and NAB for that quarter was less than 15%. The ACCC expressed regret over its
decision to consent to the CBA/Bankwest merger in October last year. ACCC boss Graeme Samuel admitted the merger was “not one we had been very happy about”. Since then, the ACCC has indicated that future mergers between major banks and other lenders would not be approved. “Any potential mergers between members of the big four and non-bank financial institutions or regional banks will be examined very rigorously and with intense scrutiny,” said Samuel. The big four have dominated in the wake of a severely crippled non-bank sector. They now hold 72% of the outstanding mortgages, worth $730bn, compared to last year’s figure of 57%, worth $539bn. “We are increasingly concerned about the potential for a less than intensely competitive structure developing among the banks and the non-bank financial institutions as we emerge from the global financial crisis,” Samuel told The Australian.
Aussie has ambitious plans for Wizard after merger AUSSIE HOME LOANS has revealed big plans for the merged entity formed following its acquisition of Wizard. Taking effect on 1 March 2009, the deal will leave Aussie in possession of the Wizard brand as well as a 166-branch-strong distribution network. Aussie’s executive director, James Symond, has set out a string of ambitious targets for the new entity. The first order of business, he said, would be to align the companies by using Aussie as the ‘umbrella brand’ for the whole group.
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This, according to Symond, would be a relatively smooth transition. “The most challenging area [of a merger] is always the culture, but our fit is extraordinarily good. The Wizard culture is quite similar to Aussie – avant garde, entrepreneurial, professional and fun,” he said. “We’re going to have our challenges, but at the end of the day we know our business. We have the right intentions, and we will ensure that we build upon the successes that the Wizard franchisees have built already.”
NAB purchases Challenger’s mortgage business IN THE major banks’ race to gain control over the mortgage market, NAB has gained a considerable advantage. In late August, NAB secured Challenger Financial Group’s mortgage business for $385m, including the aggregation platforms of Choice, PLAN and FAST (which Challenger acquired two years ago) and $110bn in mortgages under administration. The deal also included multi-brand lending using white label mortgage product capabilities and relationships with distributions associates such as Homeloans Ltd. As a result, NAB will have ownership of a network of 5,700 loan writers and 400 mortgage managers. The deal excluded any interest in non-conforming and commercial loan business as well as an $11bn back book of residential mortgages. In the past two years, the majors have stepped up their mergers and acquisitions activity. Westpac bought RAMS and merged with St. George Bank. CBA acquired Bankwest and 33% of Aussie Home Loans (which acquired Wizard from GE Money). As long as there is no objection from the ACCC, the NAB deal is expected to be completed in late 2009.
MORTGAGE EVENTS • Government launches First Home Owner Grant • AMP, ING and Citibank top Brokers on Banks survey • ANZ acquires Royal Bank of Scotland’s Asian operations
www.mpamagazine.com.au
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Behind you for what’s ahead Choices matter. At Allianz, we choose to be behind our customers and our partners, so they can have confidence in tomorrow. 100 years and counting, we’re behind you for what’s ahead. Allianz Australia Insurance Limited ABN 15 000 122 850
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2010
WORLD EVENTS • • • •
Julia Gillard replaces Kevin Rudd as Prime Minister A devastating earthquake in Haiti kills thousands Mary MacKillop becomes Australia’s first saint Pike River coal mine explosion kills 29 mine workers in New Zealand
2010 average home price
$482,375
MPA ARCHIVES
Housing affordability drops back down to GFC levels FLAGGING A renewed demand for the services of brokers, a report has shown the home price-toincome ratio has returned to pre-GFC levels. Rismark’s latest Australian housing affordability index estimates that home prices are 4.6 times higher than disposable household income. This is only slightly higher than the March 2003 figure of 4.4 times income. “During the GFC, Australia’s average home price-to-income ratio fell to a low of 3.9 as dwelling prices declined while household incomes remained surprisingly stable,” Rismark managing director Christopher Joye said.
“However, growth in dwelling prices since the start of 2009 has seen the ratio of prices to incomes restored.” Joye added that the findings dismissed claims of the home prices-to-income ratio being up as high as eight times. They implied, too, that house prices were not as unaffordable as commonly presumed. “Given there’s around $1trn of mortgage debt outstanding in Australia, which is secured against $3.5trn of residential property, the gearing is actually less than 30%,” he said.
“Australia’s average home price-to-income ratio fell to a low of 3.9 as dwelling prices declined while household incomes remained surprisingly stable” Christopher Joye, managing director, Rismark
Merger creates Macquarie’s new aggregator super group THE MORTGAGE PROFESSIONALS, the National Brokers Group and The Brokerage have signed an agreement in principle to form a new aggregator. The new merged entity will bring together a national network of more than 900 mortgage brokers that collectively have loans under management of about $16bn (as at November 2009). “The deal is expected to be finalised early next year, provided all relevant conditions, precedents and approvals are met. The new business will then be offi cially launched with its new name and brand,” the three
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aggregators said in a statement. Currently, it has the project name ‘Wonderland’. Besides the three aggregators, two other signatories to the agreement are Macquarie Bank, which helped facilitate the merger, and Jeffrey Zulman, the proposed CEO. “This is an exciting development. The new business offers all the advantages of size while losing none of the traditional brokerfocused values of these three aggregators. The business model we’ve devised is creating interest in the marketplace,” Zulman said.
Mortgage Choice expands into aggregation with LoanKit buyout MORTGAGE CHOICE has followed up on hints made in 2009 that it would be looking to make acquisitions and has bought aggregator LoanKit. The ASX-listed business has acquired “selective LoanKit assets, including its information technology platforms, loan book and contracts with 50 mortgage brokers”. LoanKit has to date subaggregated through Connective. The acquisition marks Mortgage Choice’s first step into aggregation via its fully owned subsidiary, Beagle Finance Pty Ltd, which will launch in the first quarter of 2010. Further “acquisitions and alliances” are planned in the future to “help boost the national company’s rate of loan volume growth”. Mortgage Choice CEO Michael Russell said, “Our expansion to date has been solely organic, but as the housing finance market evolves, acquisitions provide a means to take advantage of growth opportunities and maintain our position as an industry leader.” He said that alongside diversification and franchise recruitment, acquisitions and alliances were “necessary to strengthen Mortgage Choice’s growth”.
MORTGAGE EVENTS • NAB unveils Advantedge brand • RAMS exits broker channel • Commonwealth Bank injects $400m into Bankwest • AFM, Homeloans Ltd and Liberty voted top non-banks by brokers
www.mpamagazine.com.au
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2011
WORLD EVENTS • • • •
Japan earthquake and tsunami cause major damage Osama Bin Laden is killed Prince William marries Kate Middleton Arab Spring; deposed Libyan leader Muammar Gaddafi killed in crossfire
2011 average home price
$422,385
MPA ARCHIVES
Online mortgage sales meet NCCP Market sees requirements, says law firm 60,000 fewer first home buyer purchases
GADENS LAWYERS has stated that online mortgage sales meet NCCP requirements for conducting reasonable enquiries. In recent weeks, lenders have released a number of online products, with NAB unveiling its UBank online home loan and Homeloans launching its iMortgage product. Jon Denovan, senior financial
services partner at Gadens, said the law firm had received enquiries from several clients looking for guidance. He clarified that face-to-face contact to pursue reasonable enquiries with customers was not a legal necessity. “Often banks will require face-toface contact,” he said. “This is not a legal requirement; it’s just a credit requirement of the banks. It has nothing to do with the law; it has to do with what the banks say. The funder may make it a requirement.” Denovan confirmed that online sales would fulfil the NCCP requirement, and the amount of interaction necessary would be dependent on the mortgage product being sold.
Jump in loan volumes a ‘milestone’ reversal for brokers
BROKERS REPORTED a 7% spike in loan volumes to $14.8bn during the 2010 December quarter, in what has been labelled a “milestone” reversal of intermediary-sourced lending. Data released by the Market Intelligence Strategy Centre (MISC) shows the singlequarter recovery of 7% contrasts with the 11%
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reduction in broker-sourced loans in the 2010 September quarter, as well as the 13% decline experienced in the last quarter of 2009. “The full quarter was something of a milestone in the broker channel,” a statement from the MISC said, on behalf of lender and broker pool members, which represent 80% of all home loan business written by mortgage brokers. According to MISC, the result was aided by a period of rate relief at the end of last year – prior to November’s bank rate rises – as well as the acceptance by consumers of less intervention by the government in stimulating the housing market. “The better result also came on the back of a generally more active and competitive mortgage market in the broker channel,” the MISC said.
TALK OF rising enquiries from first home buyers has not translated into sales, according to RateCity. Loan Market recently claimed a 10% spike in enquiries from first home buyers in June, but a study by comparison site RateCity has indicated that 60,000 fewer first home buyers entered the market in the year to May 2011 than in the 12 months to May 2010. CEO Damian Smith said ABS figures showed that around 7,500 first home buyers per month were active in the market in the year to May. This compares with around 12,500 per month in the previous corresponding period. “Despite the Reserve Bank board’s decision to keep rates steady for the past seven meetings, it’s clear that prospective buyers are still wary about jumping into debt, because their monthly repayments are going to be much, much higher than they were in late 2009,” Smith said. “The answer is not to introduce further grants to stimulate growth in the first home buyer market. Historically, grants doled out to new buyers have tended to increase property prices without increasing the supply of new housing.”
MORTGAGE EVENTS • Ban on deferred establishment fees leads to clawbacks • Mutuals’ growth outstrips the majors’ • Home loan approvals hit 10-year low • Australian First Mortgage, Homeloans and Liberty Financial top Brokers on Non-Banks survey
www.mpamagazine.com.au
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2012
WORLD EVENTS • • • • •
2012 Olympics held in London Xi Jinping becomes President of China Costa Concordia sinking is world’s largest shipwreck Curiosity, the Mars rover, lands on Mars Barack Obama is re-elected US President
2012 median home price
$412,674
MPA ARCHIVES
Ensure low-doc loans not high risk Funding claims for borrowers, says ASIC of big banks ‘mathematically impossible’
BROKERS NEED to carry out more detailed checks when assessing borrowers for low-doc loans under the new credit protection laws. That’s the view of ASIC, which recently released its first report on how brokers are adapting to the new regulatory environment. While its first report into compliance with responsible lending legislation generally gives brokers a clean sheet, it highlights “additional risks”.
Transgressions included not recording a consumer’s requirements and objectives beyond the immediate home loan, not taking steps to verify a borrower’s income, not making proper enquiries into living expenses, and not recording an assessment of repayment ability. ASIC’s senior executive leader – deposit takers, credit and insurers told Australian Broker News that there was “room for improvement”. “I think an element of a number of these risks is making sure that enquiries are made and are in fact documented,” Greg Kirk said. “Because if a borrower later comes along and raises a question with ASIC or an EDR and says this loan was inappropriate and a broker has made reasonable enquiries but doesn’t have the records to show it, then they are very vulnerable in that sort of dispute.”
Commercial brokers warned not to put credit licence at risk
COMMERCIAL BROKERS have been put on notice that their credit licence will be at risk if they are complicit in directing clients to business lenders with suspect practices. Ahead of the government’s NCCP Phase
Two legislation that will regulate credit for small businesses, the industry has been warned that lender practices such as ‘fee fishing’ and ‘equity theft’ will be targeted. Brokers who are either consciously extorting clients or are unaware of these lender practices may be at risk. “There are those that are complicit and those that are naive and are not aware of these practices,” said Semper Capital’s Andrew Way. “If they are complicit they should be put on notice: if a lender is prosecuted for fee fishing or equity theft and a broker has been involved with them on a serial basis, their licence is at risk,” he said.
THE BIG FOUR’S claims about rising funding costs have been rubbished by a major French bank. The major banks have pointed to higher funding costs as the reason for their recent rate hikes, but Fairfax has reported that Société Générale Asia Pacific head of interest rate strategy Christian Carrillo has called the claim “almost mathematically impossible”. According to Fairfax, Carrillo dismissed the majors’ claim in a research note. “The claim that the recent increase in mortgage rates is due to higher funding costs is very dubious. The mortgage hikes seem aimed at protecting their higher profit margins,” Carrillo wrote. Carillo instead argued that nearly all sources of funding for Australian banks were less expensive than their post-GFC highs and have continued to fall in absolute terms since the second half of 2011. “Australian banks are essentially an oligopoly. They control most of the market anyway. They can effectively set rates where they want to,” he said.
MORTGAGE EVENTS • Smartline and The Mortgage Gallery merge • APRA approves Defence Force Credit Union becoming Defence Bank • Westpac launches new broker top tier to be offered preferential service • CBA, NAB/Homeside and ANZ win top three spots in Brokers on Banks Survey
www.mpamagazine.com.au
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2013
WORLD EVENTS • Boston Marathon bombing kills three people, injures 260 more • Pope Francis is first pope from Latin America • Former South African President Nelson Mandela dies • Prince George, third in line to the British throne, is born
2013 average home price
$430,269
MPA ARCHIVES
Fraud a continuing trend in mortgage broking, says regulator
FRAUDSTERS COST Australia a whopping $372.7m last year alone, and ASIC says the issue is a serious one within the mortgage broking industry. ASIC spokesperson Daniel Wright said the commission was seeing a ‘continuing’ trend of fraud in mortgage broking, which was the category of misconduct involving
brokers that was most regularly reported to ASIC. “ASIC is particularly concerned with instances where persons have engaged in fraud or other misconduct relating to information provided in loan applications. Since the commencement of the NCCP, ASIC has banned six persons from engaging in credit activities for such conduct and has 18 other current investigations. ASIC has also secured criminal charges against one finance broker under the responsible lending provisions of the NCCP.” But MFAA CEO Phil Naylor argued that fraud remained a relative rarity in the mortgage broking industry, accounting for less than a handful of finance industry cases.
Pepper acquires $250m commercial portfolio from Citibank
PEPPER HAS announced the acquisition of a $250m small balance commercial mortgage portfolio from Citigroup Pty Limited (Citibank), which the non-bank lender says is part of its strategic growth plans to extend its specialised lending services beyond residential home loan products. The deal represents Pepper’s first domestic acquisition of 2013 but comes on the back of an 18-month period in which the company
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has acquired several whole loan portfolios and financial services businesses in Australia and Europe, facilitating its expansion into new asset classes and markets. The small balance commercial loan portfolio acquired by Pepper includes loans to approximately 730 customer relationships with an average balance of circa $345,000. The vast bulk of the loan book is secured by residential and commercial properties located in NSW and Victoria, with some exposures in Queensland, WA, SA and Tasmania. Pepper Group managing director and CEO Patrick Tuttle said this latest acquisition would enable the non-bank to further diversify its business into the commercial real estate space.
Major bank loses 4% of its customers in 12 months ANZ BANK has lost 4% of its customers in the last 12 months, the worst figure reported by all the major banks, according to the Roy Morgan Research Consumer Source Survey. Despite a strong focus on customer retention, more than a million customers have stopped dealing with a financial institution in the last year. The majority of customers, 855,000 people, ended a relationship with a bank, 65,000 stopped dealing with a credit union, 18,000 left a building society, and 140,000 ended their relationship with some other financial institution. While ANZ fared the worst out of the big four, Westpac was close behind, losing 3% of its customers, while Commonwealth Bank – which has the largest customer base – lost 2.7% and NAB lost 2.3%. Among the smaller banks, 5.6% of Bankwest’s customers stopped dealing with the lender, followed by 5.2% of ING Direct’s customers, 3.8% of St. George’s customers and 2.9% of Bendigo Bank’s customers.
MORTGAGE EVENTS • Bank of Queensland closes branches, expands broker network • Stephen Porges resigns as CEO of Aussie Home Loans • Teachers Mutual Bank enters the broker market • ANZ loses more customers in a year than the rest of the big four, with Westpac not far behind
www.mpamagazine.com.au
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Australians love their brokers. And so does ANZ. That’s why we go the extra mile when it comes to giving you support. Our customer-facing ads highlight the importance of brokers by reminding Australians they can speak directly to you, for their home loan needs. And to ensure you get the support you need when you need it, our team of dedicated ANZ BDMs are ready to work with you. ANZ is the bank that sees Brokers as partners. And that all adds up to better support for your customers.
ANZ Financial Wellbeing MFAA Quarterly Survey of Brokers (September 2020), page 10, brokers’ market share of all new residential loan settlements during September 2020 quarter grew to highest share on record at 60.1% © Australia and New Zealand Banking Group Limited (ANZ) 2021 ABN 11 005 357 522. Australian credit licence number 234527.
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2014
WORLD EVENTS • Malaysian Airlines flight MH370 goes missing; flight MH17 shot down over Ukraine • Eighteen people taken hostage in Sydney’s Lindt cafe • Ebola outbreak takes hold; 7,000 die in West Africa • Comedy legend Robin Williams dies
2014 average home price
$466,850
MPA ARCHIVES
Mortgage brokers tipped to take 50% market share
THE VALUE of mortgages being written through the broker channel has hit record levels, according to data from the MFAA. The latest figures from the association show that $32bn worth of mortgages came through the broker and aggregator channel in the September 2013 quarter. What’s more, the market share now held
by the third party channel has hit a record high, with 46.4% of all home loans coming from brokers. According to the MFAA, the value of loans coming through brokers and aggregators is set to reach $120m in the 2013 calendar year, which would also be a new record. “Mortgage brokers and aggregators are well on course to smash the 2012 record lending figures, with two big members of the MFAA already reporting record figures for October,” said MFAA CEO Phil Naylor. “We expect that brokers and aggregator members of the MFAA will provide more than 50% of all home loans written in Australia over the next two years, if this growth trend continues.”
Supermarket chains seeking to expand into finance
FOLLOWING THEIR respective successes in insurance and the credit card business in recent years, it has long been expected that Coles and Woolworths will try to carve out a niche in housing finance. “Both Coles and Woolworths have signalled their intent to expand into financial services; however, neither
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operator has obtained a banking licence or approval by all the relevant regulators, so it will take some time before we see them offering the full spectrum of banking products,” says Kirsty Lamont, director of Mozo.com.au. To date, both grocery retailers have kept quite a tight lid on their intentions to branch into mortgages. It was reported last year that Coles was pursuing a banking licence from APRA that would allow it to take deposits, and Richard Wormald, general manager financial services at Coles, has confirmed the recent formation of “a joint-venture financial services business” that will operate from next year, pending relevant regulatory approvals.
Training provider works to tackle youth shortage in broking WHERE ARE all the new young brokers? One training provider is hoping to answer that question and tackle the issue of funding for new-to-industry brokers, while also raising awareness of broking as a viable profession. Training provider Intellitrain recently rebranded itself as Australis College and with the rebrand has launched a pilot program that aims to attract new brokers to the ageing profession. Australis CEO Paul Eldridge said the college had actively been out in Australian communities running career nights and information booths in local shopping centres to promote broking as a career path. “That’s something the industry needs to be better at doing: promoting the fact that it exists and that it’s a career opportunity,” he said. The MFAA has previously warned of a youth shortage in the broker profession, with figures showing membership under the age of 30 is down to just 6%.
MORTGAGE EVENTS • AFG loan book surpasses the $100bn mark • NAB ditches Homeside branding • Resimac purchases State Custodians mortgage company • Financial Systems Inquiry report released
www.mpamagazine.com.au
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2015
WORLD EVENTS • • • •
Charlie Hebdo in Paris is struck by terror attack Facebook passes one billion users 195 countries sign the Paris climate agreement Earthquake kills 8,857 in Nepal, 130 in India, 27 in China and four in Bangladesh
2015 average home price
$507,856
MPA ARCHIVES
Peer-to-peer lending arrives on Australian shores
HERE’S ANOTHER piece of jargon to add to your list: P2P lending. December saw UK peer-to-peer lender ThinCats launch its Australian website, offering loans to small businesses. It joins established firms Ratesetter, a subsidiary of a large European P2P lender, and Society One, an Australian business backed by News Corp and Westpac.
ThinCats allows sophisticated investors to assess loan submissions by small businesses (for up to $2m) and then pick an interest rate, typically between 8% and 16%. The lowest bidder gets to fund the loan, with funds going through ThinCats and the company taking a fee and ongoing cut of the interest. SocietyOne’s model is slightly different: it analyses and make decisions about the loan, while investors receive returns from the whole combined portfolio. It is also marketed at personal borrowers, with loans ranging from $5,000 to $30,000. Ratesetter connects lenders and borrowers of similar scales and includes a ‘provision fund’ in case of late payments or defaults.
VOI changes: Another addition to broker arsenal
CHANGES TO the verification of identity requirements applying to paper mortgages are expected to come into effect in mid-November this year, and a leading solicitor has recommended that brokers check that their professional indemnity insurance and fidelity insurance policies cover the changes.
“If I was a broker I would be getting a letter from my insurer to confirm I am covered for VOI,” Jon Denovan, a partner at Gadens law firm, told Australian Broker. Verifying a customer’s identification to make sure that they are who they say they are reduces the risk of identity fraud and is important even when no mortgage is taken by the customer, states a Gadens AML, VOI, and Witnessing Documents report. Identity takeover fraud has increased 103% from 2012 to 2013, according to a 2014 Veda release. A ZipID-Veda Group white paper on VOI for lenders and brokers showed that identity theft accounted for as much as 54% of all data breaches impacting banks in 2014.
APRA cracks down on lending to property investors “PUT IT OUT! PUT IT OUT!” That’s one way you could summarise APRA’s urgent call to banks to cool down the overheated investor housing market in Sydney. What set off APRA’s alarm bells was the hike in investor loan growth, which surpassed the 10% limit that the banking regulator had asked financial institutions to remain below late last year. A quarterly study by APRA for March 2015 showed that loans to investors had increased by 12.4% in the past 12 months, the sharpest rise in investor lending since September 2010. Historically low interest rates only fuelled the increase in investors heading to market, prompting an intervention by the banking regulator to put the brakes on residential property investor lending and, in turn, slow property price gains to reduce risk in the financial system. Banks have since heeded APRA’s warning and tightened their respective policies for investors, including reducing discounts to new investor borrowers and lowering LVRs to 80%.
MORTGAGE EVENTS • Siobhan Hayden becomes CEO of MFAA • AFG lists on the ASX • Major banks increase interest rates on investment loans following APRA warnings • Government responds to 2014 Financial System Inquiry
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WORLD EVENTS • The UK votes to leave the European Union • Augmented reality video game Pokémon Go is released, breaks records • Donald Trump is elected President of the United States
MPA ARCHIVES
Tension grows as brokers wait for news on remuneration review
MPA 16.01: HOT LIST Names such as Aussie’s John Symond, ANZ’s Shayne Elliot, Liberty’s John Mohnacheff, and Pepper’s Mario Rehayem make the cut MPA 16.03: UNTANGLING ASIC 86% of brokers disagree that ASIC understands the mortgage industry MPA 16.04: BROKERS ON BANKS Westpac is brokers’ top choice, followed by CBA and ANZ MPA 16.05: NON-MAJOR BANKS ROUNDTABLE MPA holds a livestreamed roundtable for the first time MPA 16.09: BROKERS ON NON-BANKS Homeloans, Liberty and Pepper fill the podium spots
ASIC’S REVIEW into mortgage broker remuneration, announced in 2015, has become an increasing source of frustration for brokers, as well as for ASIC itself. Brokers have commented that there is a lack of communication on progress of the
Commercial lending the latest sector in regulator’s sights
FIRST APRA came for the investors, and the banks raised rates. Then they came for the foreign buyers, and the banks tightened restrictions. Now Australia’s regulators are looking at commercial lending, and commercial brokers are already feeling the effects. According to Lucy Ellis, the Reserve Bank of Australia’s head of financial stability, commercial real estate and
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review – as MPA noted in its 16.03 report, ‘Untangling ASIC’ – while ASIC believes the industry has prematurely turned against the commission. At ASIC’s 2016 Annual Forum in March, MPA asked the commission’s deputy chairman, Peter Kell, about the progress of the review. He responded: “There seem to be a lot of people in the sector who believe ASIC – without even really commencing the whole review – has already made its mind up on exactly what it is going to find and what recommendations it is going to make. I assure you this is not the case. This will be a very open and transparent review.”
property developments are the “vectors of distress” and are far more risky than residential real estate lending. “The thing that has tended to be the causal agent in a banking crisis, even though you saw something go wrong in housing prices, it was the property developers,” she said. Talking at the Centre for International Finance and Regulation, Ellis was responding to a study of crisis predictors. Commercial property was also one of the focuses of the RBA’s April Financial Stability Review. Australia’s authorised deposit-taking institutions are exposed to commercial property to the tune of $214bn – a 10.4% quarterly increase, says APRA, compared to growth in residential housing finance of 8.7%.
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MORTGAGE EVENTS • Yellow Brick Road acquires South Australia non-bank Loan Avenue • Homeloans Ltd and Resimac announce merger • Australian Banking Association commissions Sedgwick review into commissions and payments to bank staff • NAB unveils new broker offering to reduce channel conflict
New Turnbull government brings winds of change
ASIC report gives brokers much-needed thumbs up
2016 average home price
$521,413
BY 2012 THE IN NUMBERS
4.5% Total rate cut over 10 years by outgoing RBA Governor Glenn Stevens
1.5% Record-low cash rate – which remains in place for three years
AUSTRALIA’S 2016 federal election took place on 2 July. But it wasn’t until eight days later that the double dissolution election, the first since 1987, was declared won by the Coalition, narrowly avoiding a hung parliament. With all the votes counted, Prime Minister Malcolm Turnbull now leads with a one-seat majority government and the closest federal majority result since the election in 1961. The man he has just beaten, Bill Shorten, had been loudly calling for a royal commission into misconduct in the banking and financial services industry. Turnbull’s victory was meant to bring a return to stability, yet the aftermath has been anything but. Following a cash rate cut in August to a record-low 1.5% – a figure that was not passed on in full by lenders – Turnbull announced early in August that the major banks would appear before a parliamentary panel once a year to explain their decisions on interest rate changes.
AS THE clock ticks ever closer to the publication of ASIC’s remuneration review, brokers need all the good publicity they can get. The publication of Report 493, ASIC’s review of interest-only home loans, has been widely seen as providing some of that good publicity and as an encouraging dress rehearsal for the larger remuneration review, which will be published in December. Report 493’s headline figure – that the proportion of brokers providing proper evidence of meeting consumer requirements has risen from 70% to 80% – was quickly welcomed by the industry. “The report supports the positive impact that brokers have on providing credible credit advice to consumers,” said MFAA chairman Cynthia Grisbrook, “by ensuring that interest-only loans are only offered after the strictest of compliance standards are met.” The FBAA also welcomed the findings. ASIC itself is pleased with the results, though it points out that “there is still room for improvement”.
20 Average number of applications lodged per broker1 Source: 1MFAA
AVOCADO SPENDING In late 2016, demographer Bernard Salt sparked international debate by saying millennials could put their smashed avocado spending towards a house.
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• • • •
WORLD EVENTS Russia accused of interfering in US presidential election Myanmar steps up attacks against Rohingya; 600,000 refugees flee Las Vegas shooting kills 58, injures more than 500 Terrorist attack at London Bridge leaves eight people dead
MPA ARCHIVES
Broker remuneration review first step in a process – MFAA
MPA 17.04 BROKERS ON BANKS Brokers pick Westpac, ANZ and CBA as top three banks MPA 17.06 TOP FRANCHISE BROKERAGES Mortgage Choice Melbourne named as top franchise brokerage MPA 17.07 TOP INDEPENDENT BROKERAGES ALIC takes home winner’s trophy for fourth year MPA 17.08 BROKERS ON AGGREGATORS Choice Aggregation Services wins brokers’ vote MPA 17.09 BROKERS ON NON-BANKS La Trobe Financial is number one non-bank
MPA 17.11 TOP COMMERCIAL BROKERS George Giovas of Axius Partners tops list with over $520m in settlements
TECHNICALLY SPEAKING, ASIC’s review of broker remuneration has changed nothing. Unlike other ASIC reviews, in which ASIC has researched, drafted and implemented new regulations, ASIC’s review of remuneration is just that: a review, and its recommendations should not be confused with regulations – for now. The commission has had its say, but
Oversight of non-bank lenders passes from ASIC to APRA
THERE ARE two ways to bury bad news, George Giovas, Axius Partners
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it is the government that will ultimately decide on new regulations. Brokers, lenders, consumer groups and individuals have been given until 30 June to submit their views to the Treasury, and the stakes could not be higher: commissions, governance, and indeed mortgage broking’s sustainability as a profession. While many stakeholders have already published initial responses to ASIC’s recommendations for broker remuneration, these responses will now be turned into detailed submissions. “This report coming out is not the end of the process; it’s the start of the process. It’s what we do from here that is really important,” said MFAA CEO Mike Felton.
and brokers have now experienced both. Method one is to run that news on a Friday when everyone’s mind is on the weekend, as APRA did when announcing curbs on interest-only lending on the final day of March. The 2017 Federal Budget took the other approach: burying bad news in more news, namely a controversial $6.2bn bank levy.
Whether the increased regulation of non-banks is indeed ‘bad news’ is up for interpretation. Yet for an industry so jaded by regulation, the announcement that APRA will now have oversight of the non-bank lenders – who were previously regulated by ASIC – has occurred with remarkably little in the way of reaction. “Of all the things that were announced, that’s the biggest deal,” Martin North, principal of consultancy Digital Finance Analytics told MPA. “If APRA now has responsibility for them, they will have to make a decision about whether they require them to hold capital, which is probably not going to happen as they aren’t ADIs.”
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MORTGAGE EVENTS • Realestate.com.au acquires majority stake in Smartline, enters partnership with NAB • ASIC bans flex commissions in car finance market • PM Malcolm Turnbull announces banking royal commission • CBA under fire for removing accreditation from “inactive” brokers
No signs on horizon of cuts to broker commissions
Big banks raising the bar for mortgage applicants
2017 average home price
$573,377
BY 2012 THE IN NUMBERS
235 Number of criminal charges laid by ASIC, July to Dec 20171
4.2% Percentage that car loans make up of all new finance commitments in 20172
TALK ABOUT an anti-climax. For the last few months, brokers, the media and industry experts have predicted that the banks would cut commissions. In August, UBS analyst Jonathan Mott wrote that CBA’s annual results put the bank “in a strong position to negotiate materially lower mortgage broker commissions consistent with the ASIC & Sedgewick reviews. We expect an announcement on lower broker commissions imminently”. Yet nothing of the sort has occurred up to time of writing. The Treasury’s consultation period, following ASIC’s Review of Mortgage Broker Remuneration, provided banks a once-in-a-decade opportunity to propose commission cuts under the guise of protecting consumers. However, the submissions of CBA, NAB, Westpac and the Australian Bankers’ Association contained no major changes. CBA’s brief submission simply delegated responsibility. “We note and support the comments in the ABA’s submission regarding a self-regulating model,” it said. In turn, the ABA said “members have already made a public commitment to self-regulation”.
ALTHOUGH ASIC and APRA didn’t exist in the 1960s, applying for a mortgage in Australia back then was a highly regulated business. The government controlled not only lending conditions but even interest rates, and borrowers would have to head to a branch to apply for a loan. Now they can apply without ever setting foot in a bank or even leaving their computer. It’s become even easier to get a mortgage; for some, it appears, too easy. Over four days in late September two major banks added extra checks to an already-extensive application process. ANZ introduced a Customer Interview Guide requiring brokers to ask questions about everything from a customer’s Netflix subscription to whether they were planning to start a family. Three days later CBA introduced a simulator that would show interestonly borrowers how their repayments would change and affect their lifestyle. Customers will be required to fill in an ‘acknowledgement form’ to proceed with an interest-only application.
22 minutes Time it takes to fill out mortgage application forms at new fintech Tic:Toc Source: 1ASIC enforcement outcomes; 2Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry
FROM PM TO PROPERTY Former PM Julia Gillard joins the property finance market as CEO of CVS Lane Capital Partners.
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WORLD EVENTS #MeToo movement goes global Saudi dissident and Washington Post columnist Jamal Khashoggi is murdered 2018 Commonwealth Games are held on the Gold Coast, Queensland Prince Harry and Meghan Markle wed in England Earthquake hits Indonesia, killing over 4,000 people
MPA ARCHIVES
Another backflip by government as royal commission announced
MPA 18.03: BROKERS ON BANKS ANZ steals the show; Westpac comes in second
MPA 18.06: TOP 10 BROKERAGES Mortgage Choice Brisbane City wins first combined top brokerages list MPA 18.10: BROKERS ON NON-BANKS Pepper Money takes the number one spot MPA 18.11: TOP 100 BROKERS Justin Doobov of Intelligent Finance is named top broker
AFTER A year dominated by political manoeuvring, it seems that the government couldn’t resist one final backflip. When Prime Minister Malcolm Turnbull announced a royal commission into banking on the final day of November, his aim was to end speculation. “It is now in the national interest for the political uncertainty to end,” Turnbull said. Yet for those working in finance,
the uncertainty has just begun. There are some things the industry knows about the royal commission. It knows it will be run by ex-High Court justice Kenneth Hayne, that it will commence in February and report to the government 12 months later, and that it will cost $75m – although some experts say more. Beyond that, facts get hazy in the extreme. The terms of reference are broad, covering “any conduct, practices, behaviour or business activity by a financial services entity that falls below community standards and expectations”. Hayne has pushed for brokers to be included in the terms of reference, but what does this mean in practice for brokers and their clients?
Productivity Commission pumps up pressure on brokers Justin Doobov, Intelligent Finance
THE PRODUCTIVITY COMMISSION is taking a hard look at how mortgage brokers are remunerated, at whether they serve their clients’ best interests and what conflicts may exist as a result of working for bank-owned aggregators. When two of the big four banks, CBA and NAB, addressed the Productivity Commission in Sydney on 1 March to
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discuss these matters, NAB agreed that trail commission could be further scrutinised and CBA said the ‘best interest’ duty could be a positive move. The Productivity Commission’s draft report raised concerns about lenders’ ownership of aggregators potentially exacerbating conflicts of interest for brokers and giving consumers “an illusion of choice”. The commission recommended that brokers who work under bank-owned aggregators – even if they operate as independent subsidiaries – should have a legal responsibility to act in their clients’ best interests. As it stands now, nothing obliges brokers to act a client’s best interests.
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MORTGAGE EVENTS • Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry begins • Susan Mitchell takes over as CEO of Mortgage Choice • Kogan enters the home loan market • 86 400 launches in Sydney
Hundreds of documents reveal industry misconduct
Brokerages speak out on trail’s value to businesses
2018 median home price
$566,933 BY 2012 THE IN NUMBERS
25% Market share held by Commonwealth Bank1
40.9% Record-high market share of non-major banks in May 20182
IT WAS another nightmarish day for banking and broking when the royal commission into banking and financial services released a torrent of documents on 7 November detailing hundreds of incidents of misconduct and reprehensible behaviour dating back to 2008. While most of the worst cases had already been heard during the public hearings, this collection of 215 documents unearths some of the smaller deeds of deception and wrongdoing that have so far evaded public scrutiny, including those involving brokers. Ninety-four financial services entities, including the major and non-major banks as well as broking franchises, provided written submissions in response to a request made by Commissioner Kenneth Hayne last December. He asked them to identify any misconduct that had occurred over the last decade, detailing the nature, extent and effect of it. He also asked them to explain what steps had been taken to deal with it; what was being doing to prevent such behaviour from occurring again; and whether it could be attributed to the group’s culture or governance of practices.
WHILE THE Australian
Lending & Investment Centre may be one of the leading broking businesses in Australia, managing director Jason Back says the removal of trail commissions could have “serious ramifications”. “We would need to have a serious look at our cost structures and review options like having a smaller support staff, or review our location and premises; our cost-toincome ratio is a measure that we always keep an eye on,” he says. Having built a successful single-broker business over 15 years, Daniel O’Brien, of PFS Financial Services, adds that, while banning trail wouldn’t kill his company, it could affect his ability to provide a quality ongoing client service. “Because I have an existing trail book and we do on average about $15m a month, I could survive on upfront commissions,” O’Brien said. “But what will happen without trail is we will earn less, which means we can’t have as much infrastructure and resources,” he added.
$198bn Second-highest value of loans written by brokers in year to September 20183
Sources: 1ACCC, 2AFG, 3MFAA
MORTGAGE HELL A HashChing billboard above a CBA branch reads: “Our brokers will go to mortgage hell, so you don’t have to”.
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WORLD EVENTS A fire ravages Notre-Dame cathedral in Paris Gunman opens fire at New Zealand mosque, kills 51 80,000 fires blaze in Amazon rainforest US President Donald Trump is impeached WikiLeaks co-founder Julian Assange arrested after seven years in Ecuadorian embassy in UK
MPA ARCHIVES
Royal commission report puts commissions under the gun
MPA 19.03: BROKERS ON BANKS ANZ wins; Bankwest leapfrogs from 6th to 2nd place
MPA 19.05: TOP COMMERCIAL BROKERS Kevin Wheatley tops the list with over $234m in loans MPA 19.06: TOP 10 BROKERAGES Acceptance Finance named top brokerage of the year MPA 19.07: BROKERS ON AGGREGATORS Liberty Network Services gets brokers’ vote MPA 19.10: BROKERS ON NON-BANKS Pepper Money wins broker survey for a second year MPA 19.12: TOP 100 BROKERS Darren Liu of My Home Loan is top broker with over $194m in settlements
THE FINAL report of the royal commission into banking and financial services was handed down in February, with some strong recommendations affecting broker pay. Speaking after the release of the report, Treasurer Josh Frydenberg confirmed the government would be taking action on all of the recommendations, including the
Liberals’ election win good news for mortgage brokers
Darren Liu, My Home Loan
THE MORTGAGE broking industry collectively breathed a sigh of relief last month when the ‘surprise’ results of the federal election were announced. While all polls had suggested a clear win for Labor, the right voters turned out on the day to secure another term in government for the Liberals.
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complete abolition of trail commissions and volume-based bonuses for brokers. The report also recommended eventually removing upfront commission, and Frydenberg said this would be reviewed in three years to determine the potential impact of doing so, considering that previous reports had all recommended otherwise. While there is still a lot to be done before the 1 July cut-off of trail commission, brokers, industry associations and wider supporters are understandably concerned about the impact these changes will have. Steve Mickenbecker, Canstar’s group executive of financial services, has said mortgage brokers won’t be going anywhere, but he raised concerns that their numbers could reduce.
This means brokers are not facing the removal of trail next year but also that other policies criticised for being detrimental to the housing market will not come into play. The hard work by the broking industry will not stop there, however. While the Liberal proposition is certainly better for broking businesses, there is still going to be a consultation in three years’ time to look at the impact of removing commissions. “Now is not the time to rest on our laurels,” wrote Mike Felton, CEO of the MFAA. The association outlined its plans to continue working with the government and Treasury to ensure the best interests of the broking industry and, ultimately, of borrowers.
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• • • • •
MORTGAGE EVENTS APRA finalises serviceability changes; banks set own floor Government launches First Home Loan Deposit Scheme Treasury releases draft legislation on best interests duty ACCC launches home loan price inquiry Connective and AFG announce intended merger
Banks setting serviceability rates a boon for borrowers
Brokers score well in AFCA’s first complaints report
2019 median home price
$527,547 BY 2012 THE IN NUMBERS
81% Proportion of Australians who believe homeownership is important1
1,133 Number of pages in Commissioner Hayne’s final report of the banking royal commission
WHILE MANY in the industry expect the changes to lenders’ serviceability assessment rates to make borrowing easier, others believe the expansion of comprehensive credit reporting and other regulations may impose higher standards on the banks. APRA confirmed at the start of July that it would no longer expect authorised deposit-taking institutions to assess home loan applications using a minimum interest rate of at least 7%. Common industry practice has been to use a rate of 7.25%. Banks will instead be able to set their own serviceability rates, with a revised interest buffer of at least 2.5% above their loans’ interest rates. Making the announcement, APRA chair Wayne Byres said “a serviceability floor of more than 7% is higher than necessary for ADIs to maintain sound lending standards”. The move could mean that many borrowers who have been denied finance because of the guidance issued in 2014 are now eligible for loans.
THE NEW dispute resolution scheme has completed its first year in action, and the figures paint a pretty picture for the mortgage broking industry. Over its first 12 months, just 0.35% of complaints lodged with the Australian Financial Complaints Authority (AFCA) were related to mortgage brokers. Of 73,272 complaints lodged by Australians against their insurer, superannuation fund, bank or other financial service provider, only 254 were against brokers. These figures back up the message that associations like the MFAA have been sharing with key decision-makers on behalf of the industry, said MFAA CEO Mike Felton. “The extremely small number of complaints demonstrates again that mortgage brokers value their customers and are highly focused on the customer outcomes they produce – and we can see the result of this in continuous market share growth,” he said. “Customers are voting with their feet. We place great value in independent data like this, as it provides an objective look at the immense value brokers are providing.”
20% Rise in complaints about home loans in last six months of 20192
Source: 1CoreLogic, Perception of Housing Affordability report 2019; 2AFCA
YOUR BROKER BEHIND YOU In response to the royal commission report, the MFAA led a national advertising campaign.
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• • • •
WORLD EVENTS The COVID-19 pandemic takes over the world Bushfires rage across Australia at the start of the year Joe Biden wins US presidential election George Floyd’s death sparks global protests
MPA ARCHIVES
High hopes for new government scheme to help first home buyers
20.03: BROKERS ON BANKS Bankwest becomes the first non-major to take gold
20.05: TOP COMMERCIAL BROKERS Adrian Lee tops the list with over $450m in loans written 20.06: TOP 10 BROKERAGES 1st Street comes out on top with a $5.8bn-plus loan book 20.07: BROKERS ON AGGREGATORS Loan Market is brokers’ top aggregator this year 20.10: BROKERS ON NON-BANKS Liberty is first among non-banks, followed by Resimac 20.12: TOP 100 BROKERS Mark Davis of ALIC reclaims his place as number one broker
THE FIRST HOME LOAN DEPOSIT SCHEME received both heavy criticism and praise after it was announced by the federal government last year. Since coming into play on 1 January 2020, nothing much has changed in that respect. There are still those who think the
Reserve Bank joins fight against COVID with record rate cut
Mark Davis, ALIC
IN A rare move, the Reserve Bank of Australia made the decision in mid-March to cut the interest rate to an incredibly low 0.25% as the COVID-19 outbreak continues to put a stop to normal life in Australia and across the world. In his statement, RBA Governor Philip Lowe said that while the virus was
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scheme is seriously flawed, while others believe it will have a positive impact on the first home buyer market. The scheme provides a guarantee that allows eligible first home buyers on low and middle incomes to purchase a home with as little as a 5% deposit. One of the biggest criticisms has been that only 10,000 people would be able to receive help in each financial year. From 1 January, 3,000 potential first home buyers were registered for the scheme, and the remaining 7,000 places were released on 1 February, with the full panel of 27 lenders available. Of those lenders, two are major banks, 20 are customer-owned banks and the rest are non-majors.
“first and foremost a public health issue”, it was also having a real impact on the economy and the financial system. Border restrictions, the cancellation of hundreds of events, business closures and people in self-isolation are having a detrimental effect on businesses. According to the Prime Minister and other government officials and experts, these measures may last for the next six months. Lowe said that while the country waited for the virus to be contained and the economy to recover, the priority for the RBA was to “support jobs, incomes and businesses so that when the health crisis recedes, the country is well placed to recover strongly”.
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• • • •
MORTGAGE EVENTS Home loan demand reaches record high Loan Market acquires NAB-owned aggregation groups Lendi and Aussie reveal plans to merge Consumer credit reforms introduced, relaxing responsible lending rules for business lending
Finance industry embarks on new era of open banking
Australia looks into face of recession in wake of COVID
2020 average home price
$568,506
BY 2012 THE IN NUMBERS
0.10% Record-low cash rate set by RBA
$211bn Record-high value of broker settlements in year to September 20201
THE CONSUMER DATA RIGHT was officially
AFTER A difficult year in which businesses
launched on 1 July, heralding a new era of open banking in which consumers can choose to share their data in order to access more personalised financial products and services. All four major banks are now able to share their customers’ data upon request, but this is set to ramp up over the following months, and by the end of the year it is expected that dozens more companies will be accredited. While the CDR only currently relates to deposit and transaction accounts and credit and debt cards, from 1 November this will be extended to include data on home loans, investment loans, personal loans and joint accounts. Australian Banking Association CEO Anna Bligh said the system would give consumers greater access to personal information, as well as the ability to allow banks to provide third parties with safe and secure access to their data.
were forced to close and Australians were encouraged to stay inside, it’s no surprise that Australia’s GDP has suffered. At the start of September, ABS figures confirmed that GDP had dropped consecutively for two quarters, putting the country into a recession. The three months to June saw the largest quarterly fall since records began in 1959, with a 7% decrease in GDP. The biggest drop recorded before this was just 2% in 1974. This June quarter decline followed a 0.3% drop in the March quarter, when the country first felt the impacts of travel and social restrictions. Spending on services declined 17.6%, with falls in transport services and operation of vehicles and hotels, cafes and restaurants. ABS head of national accounts Michael Smedes said, “The June quarter saw a significant contraction in household spending on services as households altered their behaviour and restrictions were put in place to contain the spread of the coronavirus.”
22% Percentage of Aussies who have postponed buying a home due to COVID2 Source: 1MFAA; 2AMP
MPA PANELS GO VIRTUAL
MPA’s roundtables are taken online in 2020 as restrictions prevent meetings in person
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L-R: Peter White and Mark Davis (2019)
L-R: Tony McRae and Gerard Tiffen (2014)
L-R: Susan Mitchell and Denya Dean (2019)
L-R: Ian Rakhit and Simon Orbell (2017)
Marisa Schulze (2014)
L-R: Glenn Gibson, Murray Cowan, Mike Felton (2017)
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Aaron and Bernadette Christie David (2017)
Bluestone Group (2017) Young Guns 2014
L-R: Mario Reyahem, Otto Dargan, Stewart Saunders (2017)
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Alliance Mortgage Solutions (2015)
L-R: Tracy Kearey, Alan Hemmings, Mhairi Macleod (2016)
L-R: John Mohnacheff and Alf Vasta (2016)
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Tanya Sale (right) of outsource Financial, Aggregator of the Year (2017)
L-R: Michael Burke and Sam White (2019)
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PEOPLE
BROKERAGE INSIGHT
Finding connections in Geelong Facing into the worries and challenges of repeated lockdowns, the Loan Market Geelong team have continued their mission to put their clients first, says franchise owner Sarah Thomson
WITH VICTORIA as their base, the Loan Market Geelong team have had to deal with some tough challenges during the COVID-19 pandemic. But despite the worry and stress about their own situation, franchise owner Sarah Thomson says they have always put their clients first. After starting out around 18 years ago as a solo broker working out of her own home, Thomson moved into a real estate agent’s office as she got busier, then to a shared office with other brokers, then to an office on her own, and now works in a large office with her team. As Victoria faced into heavy restrictions and lockdowns over the past year and a half – more so than any other part of Australia – the Loan Market Geelong team prioritised
focusing on their existing clients. Despite not being at the office, they made sure that when a client called they were attended to very quickly, understanding that clients
“If they don’t have a connection with the broker, they’ll go on to find someone they do have a connection with,” Thomson says. “It’s really about finding common ground
“It’s really about finding common ground and listening to our clients and to what their needs are, and then fulfilling those needs” were stressed and needed answers fast. Thomson also brought on new staff to look after the brokerage’s back book and arranged the teams to allow clients to be looked after at each stage of the settlement journey. She says finding a connection with the borrower is really important.
and listening to our clients and to what their needs are, and then fulfilling those needs. Probably one of the biggest things is reassurance; clients want to be reassured they’re doing the right thing.” Reassurance has definitely been important over the past 18 months. Not only were
ON WOMEN IN BROKING Fourteen of Loan Market Geelong’s 15 staff are female, with the only male representing a quarter of the four-person broker team. This was not a deliberate decision; it just so happens that as Sarah Thomson has advertised administrative positions over the years, only one male has ever applied. Reflecting on her time in the industry, in which she has repeatedly been the only female broker in the top 10 of MPA’s Top 100 Brokers, Thomson says she loves the fact that there are now more women around. While the MFAA’s figures show a declining proportion of women in the industry and falling numbers being recruited, she says female brokers possibly have more of a presence than they used to. “When I started at Loan Market there were 100 men and two women, but now there’s much more diversity across the group, which is fantastic,” Thomson says.
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LOAN MARKET GEELONG AT A GLANCE Franchise owner: Sarah Thomson Location: Geelong Year founded: 2007 Services: Home loans, investment loans, construction loans, debt consolidation, car loans, equipment loans, personal loans, business lending Number of employees: 15
clients uncertain and worried, but brokers also had to keep learning about changes in the lending space and then passing the right information on to them. Thomson says this was one of the biggest
brokerage welcomes customers with a wide range of borrowing needs. It does not market to any specific segment, as most clients come through word of mouth. Thomson says it really depends on the
“Every single person working here at the moment absolutely loves what they do and enjoys coming to work each day” challenges of the past year as changes came into play every week and new borrower incentives were released. “The biggest thing has been trying to explain it all to first home buyers. We’re having to explain so many acronyms – FHLDS, LMI – and build grants that can’t be contributed towards the purchase, their eyes just glaze over. There are so many options and entitlements for consumers, it can be overwhelming,” she says. In addition to first home buyers, the
market cycle at the time, but there are currently a lot of construction borrowers coming to the brokerage for solutions. However, she believes it’s important to have a holistic offering for clients. “We want to have that diversity of being across all those areas: first home buyers, construction, investors,” she says. “It gives you a bigger clientele that will come to you. First home buyers are people that have never done this before; if they’re constructing as well, we can help them as
they buy land and do the construction. They deal with us for a long time, and the majority of those will come back to us when they’re looking at investing or referring other friends.” The overwhelming nature of the last year and the push to support clients has meant the team at Loan Market Geelong have had to work long hours. With employees not being able to go out because of the lockdowns, and having to work into the evenings and through weekends, Thomson says her main focus for the next year is to look after both their wealth and health. This will include making sure her team finish work on time and can tune out when they leave the office, as well as introducing team-building events. Despite the long hours and complex environment, Thomson says the culture of the brokerage is “awesome”, and everyone supports each other and loves what they do. “Every single person working here at the moment absolutely loves what they do and enjoys coming to work each day,” she says. “We don’t feel it’s like work. I would say they’re pretty happy faces every day, which is brilliant.”
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PEOPLE
OTHER LIFE
TELL US WHAT YOU GET UP TO Email rebecca.pike@keymedia.com
Led Z eppelin fa n a nd avid record collector John Gregory says Stairway to Heaven is his favourite song of all time
300
Rough number of records John Gregory owns
10
Years Gregory has been collecting records
$5,000
Approx. value of Gregory's most expensive vinyl record
A MUSICAL HISTORY
Broker John Gregory has a growing collection of vinyl records that tell a story of the music he fell in love with as a boy
MORTGAGE BROKER John Gregory’s “love affair” with music began when the Beatles came to Australia when he was just eight years old. He went on to see the likes of Michael Hutchence, Billy Thorpe and ACDC perform in local pubs, and over the last 10 years he has collected hundreds of vinyl records.
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Gregory owned his first record at about 16 years of age and now has more than 300 in his collection. One of the records – Led Zeppelin I, released in 1969 – is estimated to be worth around $5,000. Beyond simply collecting and listening to these records, Gregory says he enjoys learning the history of the bands, how
they formed, and about their journeys to becoming famous. “When you pick up an album, the whole story is there. The album cover art, the album sleeve, the graphics, the words to the songs, the record itself – it's the history part of it that I enjoy more than anything else,” Gregory says.
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