APRIL 2020 ISSUE 17.07
Big bank to repay borrowers’ interest Major bank to refund interest on interest during loan pause /04
Non-major’s big growth spurt HSBC is expanding its footprint as one of Australia’s leading non-major banks /18
GERALD FOLEY National Mortgage Brokers has a proven record of growing strong broker businesses – in good times and in bad, says MD Gerald Foley /14
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Change is here to stay NAB will play a ‘critical role’ in responding to the impact of COVID-19 /20
ALSO IN THIS ISSUE… Mortgage interest rates soar overseas How the mortgage world is reacting to COVID-19 in North America /02 The one way we’ll get through COVID-19 PLAN Australia on the broking industry’s resilience in uncertain times /23 ‘No one appears to fight this’ One broker makes the case for an end to clawback commissions /30
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NEWS
IN THIS SECTION
Lenders Major to refund interest on deferred payments /04
Associations Borrowers’ credit ratings not affected by holidays /06
Market Home values continued to rise over March /10
Aggregators Aggregator applauds brokers’ adaptability to change /12
Technology Non-bank implements remote verifi caton of identity /08
www.brokernews.com.au APRIL 2O20 EDITORIAL
SALES & MARKETING
Editor Sarah Megginson
Publisher/Sales Manager Simon Kerslake
News Editor Madison Utley
GLOBAL WATCH How is the mortgage and broking world responding to the COVID-19 pandemic overseas? Here’s your snapshot of the industry news that matters most in North America
MORTGAGE RATES CLIMB IN CANADA risk faced by financial institutions is the major element driving the recent sharp increases in mortgage rates for new loans, Dominion Lending Centres chief economist Sherry Cooper has said. “These disruptive forces of COVID-19 have markedly reduced the earnings of banks and other lenders and dramatically increased their risk,” Cooper said. “That is why the stock prices of banks and other publicly traded lenders have fallen very sharply, causing their dividend yields to rise to levels well above government bond yields. “Thus, the cost of funds for banks and other lenders has risen sharply despite the cut in the Bank of Canada’s overnight rate,” Cooper added. GREATER
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US MORTGAGE APPLICATIONS DROP SHARPLY applications in the US tumbled in late March; however, refinancing is up by almost 200%. Stats from the Mortgage Bankers Association reveal that as the coronavirus and its impacts tainted the housing market with a dose of uncertainty and pushed mortgage rates higher, mortgage applications slumped. Its Market Composite Index of mortgage applications was down 29.4% compared to the previous week on a seasonally adjusted basis, and down 29% unadjusted. The Purchase Index was also down 15% on a seasonally adjusted basis and down 14% unadjusted. However, the Refinance Index was down 34% week-over-week, yet was a massive 194% higher than 12 months earlier. MORTGAGE
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STRUGGLING BORROWERS PRIORITISED BY LENDERS Canada Mortgage and Housing Corporation (CMHC) says homeowners and THE landlords who are struggling with their finances will be the priority of banks and lenders amid the COVID-19 outbreak. “If you can tell your bank the reasons why you need help, it’s as simple as that, you will get help. What we don’t need right now are people who are going to be okay jamming up phone lines to banks because they’re crowding other people that are in true need,” said CMHC CEO Evan Siddall. Several mortgage lenders in Canada have already put in place measures similar to the ones implemented by banks in Australia, such as repayment deferral for up to six months.
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This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry 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 Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.
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Let’s chat. 13 11 33 Approved applicants only. Lending criteria apply. Other fees and charges are payable. Liberty Financial Pty Ltd ABN 55 077 248 983. Australian Credit Licence 286596.
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NEWS
LENDERS NON-BANK INTRODUCES DIGITAL VOI lender Liberty Financial has accelerated the rollout of the digital verification of identity (VOI) solution it began trialling last year. Having enlisted the aid of legal and compliance innovator MaxID, Liberty Financial has moved forward rapidly with the rollout of its VOI services for mortgages and conveyancing transactions. Caesar Ibrahim, head of residential operations at Liberty, explained that “quickly adapting so we could continue to support customers and brokers during this challenging time … was our top priority”. NON-BANK
MUTUAL BANK SHOWS SUPPORT FOR BROKERS Mutual Bank Limited has announced changes to its existing upfront commission model for brokers, introducing a deferred payment calculated by reviewing the loan account balance at the end of the month, after the 12-month anniversary of the loan. The bank will now pay a top-up commission on the difference between the current loan account balance (net of any offset) and the loan account balance used in the initial upfront calculation of the loan, provided that the movement is greater than or equal to $20,000. TEACHERS
“A lot of people will have to resort to putting their mortgage on hold … that’s the cold, hard reality” Sally Tindall Research director, RateCity.com.au
Commercial Loans
MAJOR TO REFUND INTEREST ON INTEREST DURING LOAN PAUSE CBA says it will make payments to offset the interest costs that will accrue for customers granted a six-month deferral of home loan repayments
possible after the pause to get your mortgage back on track.” Here’s what the big four banks are offering: CBA: Following the six-month pause, home loan repayments will remain the same as before, with the loan term being extended. CBA will also make a one-time payment to offset the interest on interest being charged to customers over the deferral.
the bank’s policy on deferred home loan repayments, CBA group executive of retail banking services Angus Sullivan said, “When a home loan repayment is deferred for six months, interest is calculated and added to the loan balance each month, which can result in customers paying interest on interest each month. “To support more Australians, we will make a one-time payment to all customers who are receiving a home loan deferral because of the coronavirus. This means for an average loan of $350,000, CBA will be refunding approximately $45 to offset the effect of interest on interest over the six-month period. Customer payments will vary based on their loan amount and interest rate.” According to financial
comparison site RateCity.com.au, clearing the debt following a repayment pause will be an “uphill battle” for many Australians. Its research showed a mortgage holder could end up paying as much as $17,000 extra over the remainder of their loan if they didn’t make additional repayments following the holiday, assuming a borrower was five years into a 30-year loan with a balance of $400,000. While RateCity research director Sally Tindall congratulated the banks for providing an option for those who couldn’t meet their repayments, she said it was important that customers understood the long-term implications of taking a six-month break. “A lot of people will have to resort to putting their mortgage on hold during this crisis. That’s the cold, hard reality for many families,” said Tindall. “If that’s you, try to come up with a plan to pay the money back as quickly as
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EXPLAINING
Westpac: Impacted customers are being offered a three-month pause with the option for a further three months after review. Home loan repayments will increase after the deferral, but the loan term will remain the same. NAB: Following the repayment holiday, home loan repayments will increase, but the loan term will remain the same. ANZ: Customers can choose to keep the loan term the same or extend it by six months, with a review at three months. Both options will likely result in mortgage repayments increasing after the pause.
Rapid Approval
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NEWS
A S S O C I AT I O N S COVID-19 RELIEF FOR BUSINESSES EXPANDED Small Business Relief Package has been expanded to include 30,000 more businesses, meaning 98% of all businesses with a loan from an Australian bank are now included. Among the key updates from the Australian Banking Association was the extension of the threshold for businesses to be able to defer loan repayments for six months, raising it from those with loans of up to $3m to those with loans of up to $10m. The new measures cover around 90% of Australian commercial landlords, provided they do not terminate leases or evict current tenants. THE
ACCC AUTHORISES BANKS TO COOPERATE ACCC has provided a second
THE authorisation for the
BORROWERS’ CREDIT RATINGS NOT AFFECTED BY REPAYMENT HOLIDAYS Borrowers granted a six-month deferral of loan repayments will not have their credit rating affected, as long as they were up to date prior to the economic impact of COVID-19 Australian Banking Association has made official its approach to credit reporting through the COVID-19 crisis, with the primary driver of its decision being alleviating stress for Australian customers. “If a customer is granted a deferral on their mortgage and other credit products because of COVID-19, banks will report customers as not having missed a repayment, provided they were all up to date when granted relief,” said ABA CEO Anna Bligh. “Australia’s banks are here to support customers who have lost their jobs or significantly lost income because of COVID-19 … Customers in these circumstances THE
should not have to worry about their credit rating as well.” The approach for customers who were already behind on their repayments before being granted a COVID-19 deferral is yet to be decided. Banks will simply not report on their repayment history for the duration of the deferral period by leaving that field blank; once the deferral has ended, the institution will determine how to report for those customers retroactively. “There may be other factors which can affect a customer’s credit rating, but customers accepting a COVID-19 loan repayment deferral can rest easy that the deferral will not be one of them,” said Bligh. The Financial Rights Centre
has “warmly welcomed” the ABA announcement. CEO Karen Cox said, “People calling our advice services have so much to contend with right now: the stress of not being able to pay their bills, fears for their own health, and fears for loved ones. They should not have to worry about their ability to access credit when this is all over. “We warmly welcome the ABA’s announcement that their customers’ credit reports will be quarantined from the impact of this crisis, and we call on the rest of the finance industry to follow suit.” Meanwhile, Mike Laing, CEO of the Australian Retail Credit Association, said those who were having trouble reaching their lender didn’t need to panic. “Lenders are aware that some customers are finding it hard to get in touch. There are a large number of people seeking assistance at the same time. Don’t worry, you won’t be disadvantaged if you are delayed in making contact.”
Australian Banking Association and banks to cooperate in providing supplementary relief packages for individuals and businesses affected by COVID-19. The authorisation protects against court action for conduct that might otherwise raise concerns under the competition provisions of the Competition and Consumer Act 2010. The ACCC grants authorisations when the public benefit of the decision outweighs the public detriment but can review its decision at any time.
“Customers in these circumstances should not have to worry about their credit rating as well” Anna Bligh CEO, Australian Banking Association
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Faster than Banks, Cheaper than Caveats EASTWOOD SECURITIES
Melbourne (03) 9225 5189
Sydney (02) 9239 3144
Adelaide (08) 8408 0800
Eastwood Securities Pty Ltd • ACN: 143 030 540 • ARSN: 146 451 792 • Credit Licence Number: 385467
eastwoodsecurities.com.au www.brokernews.com.au
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NEWS
TECHNOLOGY
NEXTGEN USES GOVT DATA TO VERIFY DOCUMENTS has launched its new Document Verification Service (DVS) to provide a “timely solution” to the COVID-19 social distancing rules. Multiple lenders are seeing the benefits of being able to avoid face-to-face interaction with customers. The service within ApplyOnline removes the need for physical copies for approval of mortgages by integrating with both federal and state government databases to verify government-issued identity documents. NEXTGEN.NET
POPULAR INDUSTRY TOOL NOW FREE TO USE popular document curation app has been made free for small businesses, brokers included, until the end of the financial year. All new and existing customers will be provided with full access to all online Ezidox plans, said CEO Frank Mastronardo. “It’s been a hard decision, as we ourselves are a small business, and have in effect turned off our revenue line for the rest of the financial year. However, it’s the right thing to do … I’m relying on the broader business community to use this offer fairly.” A
“A customer can now discuss their borrowing needs with a broker via phone, Skype or Zoom” Daniel Carde General manager of distribution, Resimac
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NON-BANK IMPLEMENTS REMOTE VERIFICATION OF IDENTITY A non-bank mortgage provider has joined the ranks of lenders that are ramping up their technology a bid to ensure brokers can continue to originate loans without the need to meet borrowers face-to-face, Resimac has partnered with MSA National and First Mortgage Services in leveraging MSA National’s IDYou app to facilitate remote verification of identity. The lender has also authorised the use of digital signatures and is looking to implement a digital document delivery system. According to GM of distribution Daniel Carde, Resimac is doing all it can to help brokers carry on “business as usual” during these times when face-to-face meetings aren’t possible. “The change means a customer can now discuss their borrowing IN
needs with a broker via phone, Skype or Zoom. The broker then completes their verification of identity remotely using the IDYou app and submits the loan for assessment in the normal manner,” said Carde. “Thanks to our new panel solicitor arrangement, we are putting the final touches on a digital loan document solution that will see the loan document pack emailed directly to the borrower, ready for digital execution and return. Essentially this is completely paperless and includes the ability to upload property insurance and other related documents required for settlement.” MSA managing director Sam Makhoul expressed excitement
about helping to bring more of Resimac’s processes into the digital space, but reiterated the commitment to “providing customers and brokers with an actual person to talk to throughout the loan settlement process”. Resimac has also simplified the application process for borrowers seeking a six-month repayment holiday due to financial hardship, including doubling the team that is handling hardship applications and launching an online hardship application form so customers can avoid phone line queues. “These changes will also take pressure off brokers who are usually the first point of contact when a borrower experiences financial hardship and is seeking advice from their trusted adviser,” said Carde. “Brokers are our small business customers and we believe in assisting customers when it becomes increasingly difficult for them to conduct normal business activities.”
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NEWS
MARKET FIRST ABS DATA ON PANDEMIC’S IMPACT ABS has released the results of its first ‘Business Impacts of COVID-19’ survey. The collection period for this survey predated the government’s implementation of Phase 1 social distancing measures, which forced many small businesses to drastically change their operations and face even more acute challenges. At the time of the survey, however, 49% of businesses surveyed were already suffering to some degree as a result of COVID-19, with 86% expecting to be impacted in future months. THE
HOME VALUES CONTINUED TO RISE IN MARCH, BUT OUTLOOK IS CAUTIOUS Although home values remained positive in March, a drop in both supply and demand is expected in Australian property markets in the months ahead the CoreLogic home value index showed the trend in housing values remained positive throughout March, recent market activity has become “less meaningful” as the unprecedented uncertainty around the COVID-19 pandemic seems likely to bring activity to a temporary halt. Recent polling has shown that more than 60% of Australian real estate agents have seen buyer and seller enquiries fall by more than 50% over recent weeks, and the majority expect another drop in the coming weeks. Further, reports generated across CoreLogic’s platforms, utilised by around 70% of real estate agents, have more than halved, foreshadowing a “substantial drop” WHILE
in property listings activity in the immediate future. “We are expecting the number of residential property sales to fall dramatically over the coming months – a consequence of tanking consumer confidence, a rising jobless rate, and more cautious lending practices,” said CoreLogic head of research Tim Lawless. “Restrictions on open homes and onsite auctions will compound the slowdown in buyer activity, as would any future policy announcements related to peripheral services such as building and pest inspections, conveyancing and furniture removals.” Unfortunately, the lack of activity will translate to a lack of data to be gathered, making it challenging
to predict the future. “If we are correct in our expectation that housing market activity is set to temporarily plunge, we could see increased volatility and a reduction in certainty creep into housing market measurements until activity picks up,” said Lawless. “Measures of housing values and prices rely on timely updates of recently sold properties; a material slowdown in turnover is likely to create some challenges over the coming months in how we report on market conditions.” However, while activity seems sure to slow, the impact on dwelling values remains less certain. “Considering the temporary nature of this crisis, along with unprecedented levels of government stimulus, leniency from lenders for distressed borrowers and record-low interest rates, housing values are likely to more be insulated than sales activity,” he added. “The wildcard remains the sheer uncertainty of how long this health crisis and associated economic disruption will persist.”
LENDERS LIKELY TO SEE LOW APPETITE FOR CREDIT company GlobalData has examined the effects of the GFC to inform its modelling of the impact the pandemic will have on banks and the financial health of the country. “The RBA and government funding to lenders will help, but it is highly uncertain whether there will be sufficient appetite for credit to see anything more than marginal increases in 2020,” said Andrew Haslip, head of financial services content for Asia-Pacific. ANALYTICS
“We are expecting the number of residential property sales to fall dramatically over the coming months” Tim Lawless Head of research, CoreLogic
SIGNS OF FALLING HOUSING DEMAND Source: CoreLogic
Number of Australian real estate agents reporting a significant drop in buyer and seller enquiries
60%
Number of real estate agents who generate reports across CoreLogic platforms
70%
Drop in reports generated by real estate agents, foreshadowing a “substantial drop” in listings activity in immediate future
50%
0%
10
10%
20%
30%
40%
50%
60%
70%
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EASTWOOD SECURITIES UPDATE
RELIEF BRIDGING LOANS FOR BUSINESS New product launch As Eastwood Securities celebrates 10 years in business, they pivot their offering with a new product launch to help businesses cope during these challenging times
Peter Schembri, Director, Operations
hard to believe the Eastwood Securities Mortgage Fund will be ten years old in June this year. It’s certainly not going to be a milestone any of our team will forget in a hurry, with the most challenging economic, health and social circumstances any of us will have experienced in our lifetimes affecting how we do business. Over this ten-year period, we have grown significantly and established robust and compliant business systems that will ensure our ability to address the current circumstances and assuring continuing high levels of service to our broker network and their clients. Eastwood Securities’ place in the non-conforming private lending market is now well established. With both investors and borrowers spread across all states and territories of Australia. It is exciting to note that over the past years a significant portion of new commercial lending business emanated from referrals provided by our existing brokers and past borrowers. The current economic IT’S
challenge has led Eastwood Securities to launch a new short-term lending product that has been designed specifically to address the pressures and demands placed on small businesses in the current market. The new Eastwood Securities product, “Relief Bridging Loans for Business”, is targeted at new and existing business borrowers that have
Catherine Willoughby, Business Development Manager
maximum of twelve months, but there is f lexibility to work outside those terms on an individual loan basis. This loan facility is available to all small business customers whether city based or regional and from any business discipline. With our f lexible and rapid loan application and review process we can provide funding to eligible borrowers in a timely
Eastwood Securities can consolidate that debt making overall debt servicing more manageable. Capitalised interest loans have always been an effective form of bridging finance for businesses with short term diminished cash f lows. There has been no greater example of when such facilities provide value, than what we are
“It is exciting to note that over the past years a significant portion of new commercial lending business emanated from referrals provided by our existing brokers and past borrowers.” equity in property. This capitalized, fixed interest facility is aimed at providing working capital for businesses that need liquidity during the next six to twelve months with an alleviation of monthly interest commitments. Loan terms generally range from a minimum of six months to a
manner minimizing cash f low risk to those businesses. If a business owns or has access to real property with significant equity available and there is a viable exit strategy at loan term, Eastwood Securities will be able to assist. Furthermore, if a business has multiple loans (secured or unsecured)
experiencing in this current extraordinary climate. With the planned level of government support being provided to both small business and individuals, many are now projecting a more rapid recovery from the current situation once the worst has passed, enabling businesses to plan with greater confidence.
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NEWS
A G G R E G AT O R S
FORMER NON-BANK EXEC JOINS AGGREGATOR has appointed a former non-bank executive as its state director for Western Australia. Royden D’Vaz has over 25 years of experience in finance, having most recently spent five years as national head of sales and marketing at Bluestone, where he spearheaded the lender’s broker and industry relationships. “I’m very excited to now be working shoulder-to-shoulder with brokers in their businesses at a time when there are both significant opportunities as well as immediate challenges ahead,” D’Vaz said. LOAN MARKET
AMID CHANGE, AGGREGATOR APPLAUDS BROKER ADAPTABILITY Brokers are embracing new ways of working to protect their businesses and look after their customers during the COVID-19 crisis
AGGREGATOR DOUBLES DOWN ON COMPLIANCE Finsure has announced that compliance will be a driving priority for the group this year as the government works towards introducing a best interest duty for mortgage brokers. According to GM of aggregation Simon Bednar, the group is doing “everything possible” to ease the burden the new measures will place on brokers. Bednar highlighted the group’s Infynity CRM platform as being “a major point of difference”, as it uses predictive data to provide insights into broker behaviour. AGGREGATOR
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the industry adapts to social distancing and a move towards isolation, brokers are embracing new ways of working to protect their businesses and look after their customers, according to Australia’s largest mortgage aggregator. Connective has reported that registrations for its newly adapted digital learning and development program rose by an average of 30% in March, with some virtual events seeing a 400% surge in registrations. Connective moved its entire learning and development program, along with all client meetings, into a digital environment in March, with the AS
full program of content now being delivered digitally both live and on demand. CPD points will still be allocated for these sessions where relevant. “We are thrilled to see that in moving our learning and development program to a completely virtual offering we’re connecting with more brokers and helping them to improve themselves and their business,” said Mark Haron, Connective’s executive director. “The success of our transition is shown in our registration numbers, which have well surpassed many of the live events. It’s important to us that we rise to this challenge when members need
us most, and we’ve had great feedback from members on the support we’re offering, which we’re very proud of. “We plan on rerunning some programs as a physical event at a later date, but for now we’re focused on continuing to deliver the content and insights to our members as efficiently and effectively as we can.” Members are also being provided with regular updates and guidance on how to work remotely, and tools such as email templates to send to clients to reassure them that brokers are open for business, explain the broker support available for those experiencing hardship, and cover the benefits of refinancing. “Wherever possible, we will work to support our members in facilitating meetings online and ensuring they are as informed as possible on the evolving situation, including where we’re at, where we’re going and how we plan to get there,” said Haron.
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FE AT URES
BUSINESS PROFILE
‘BROKERS ARE IN OUR DNA’ As a trusted partner to many of Australia’s top brokers, National Mortgage Brokers has a proven record of growing strong broker businesses – in good times and in bad. Australian Broker reveals nMB’s strategy for guiding brokers through the current market and beyond
NATIONAL MORTGAGE BROKERS AT A GLANCE
450+
brokers
$5bn
annual settlements
all the market disruption and uncertainty for business owners and the greater community of late, consistency and support are in high demand. Providing the latter has been National Mortgage Brokers’ primary focus in recent weeks so it can play its part in ensuring the broking community not only survives the current crisis but thrives in the future. As managing director Gerald Foley explains, nMB is able to pivot to respond to the evolving crisis, thanks to the support that comes with being part of the Liberty Financial Group. “nMB is backed by Liberty, one of the strongest financial institutions among the non-banks, and Liberty has been through a number of economic cycle challenges and come out stronger each time,” Foley says. “Now, as through the GFC, nMB and Liberty remain open for business and ready to continue their support of nMB and our brokers, and the whole broker market.” With over 18 years of experience, nMB is large enough to meet a borrower’s most complex needs, WITH
while also continuing to offer personalised service and a tailored approach. Until the COVID-19 outbreak, nMB’s key focus in 2020 was on assisting its business partners in making the move from “broker to broker business”, which it was accomplishing by focusing on the 5Ps: people, premises, process, partners and planning (see boxout overleaf ). In recent weeks, this focus has shifted to ensure that nMB is “supporting our brokers at three levels”, Foley says: “business operator, employer and personal”. “Our broker network are small business owners themselves – they’ve got debt, families, they’re running a business, they’ve got staff – so they are going through a lot. What the COVID-19 crisis has shown is that borrowers not only need their broker to source a loan, but they are often their first port of call when things get difficult. We should really take that as a compliment. When a client rings their broker, the conversation is obviously about that client and their needs, but there is an immense burden on the broker to
be problem-solving and supporting their clients at a time when they are under a lot of pressure themselves,” Foley says. “Fortunately, we’ve been able to win the fight to keep trail for brokers. These are the times when trail commission is earned more than ever. If we were in a market where brokers lived off upfront commissions only, many brokers would have to consider whether to pack up and leave the industry. That’s not good for customers and it’s not good for lenders, especially smaller ones, who will need brokers when the market comes back.” To that end, nMB has internally developed and released a number of resources in recent weeks, including tools and ‘how to’ guides for its network of brokers so they can continue to adapt and operate in this market. “For instance, we’re extracting a lot of information and summarising it for our brokers, about the stimulus packages, what’s available and how to access it. We’ve put together a series of ‘How to’ guides on things like ‘How to build an online presence’ and ‘Social media for brokers’ – and, given the current
REPAYMENT PAUSE CALCULATOR • nMB recently released its Repayment Pause Calculator, which can be used to explain to your customers the impact of a Repayment Pause.
$17bn
loan book
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• For example: a loan balance of $500,000 with 22 years remaining, which is paused for six months, would cost an additional $8,300 if the original term was maintained post the Repayment Pause. • It would cost an additional $24,000 and add 10 months to the loan repayment period if the loan term was extended by six months.
In partnership with
Gerald Foley, managing director, nMB
climate, we’ve just launched our guide on ‘How to work well from home’. We can’t give advice on everything, but we can point our brokers in the right direction and give them the resources they need to get through this period.” nMB has also reached out to every lender on its panel and put together a document outlining every lender’s different policies and processes around financial hardship. “We were checking that everyone was OK and providing information so they could prepare for the big
“We can move quickly and work with our brokers … [and we have] the backing of a really strong balance sheet and a company that’s got brokers in its DNA” wave of enquiries and use this to help them quickly turn over calls. Our brokers don’t have time to scurry around the different lenders to get this information individually,
because they’re being inundated by anxious clients who all have similar questions about financial hardship and loan repayment holidays,” Foley says.
“On that note, the use of expressions such as ‘repayment holidays’ has really created a lot of misunderstanding by borrowers. The number of calls brokers and lenders have received from borrowers thinking they were being offered a ‘holiday’ from being charged interest has been significant, so I’m really pushing to use and promote the term ‘repayment pause’ from here on.” Foley says the lack of understanding around what a loan repayment holiday actually means has created unnecessary confusion and work for everyone in the industry. This is because many people mistakenly thought a repayment holiday meant they were “getting something for nothing” – for instance, they thought it meant no interest would be charged on the loan whatsoever for six months – and, perhaps understandably, “they didn’t want to miss out”, Foley says. He adds that out of every 100 enquiries about repayment pauses a lender or broker might receive, “over half hang up once you explain what it really means”. “There have been some ridiculous examples. I was speaking to one lender who had a client with $140,000 in an offset account. They withdrew the money and then applied for financial hardship and requested a repayment pause. That isn’t the intended purpose of repayment pauses,” Foley says. “There are many customers who don’t understand what ‘financial hardship’ actually means, and others are also responding or preparing for what may happen if this situation escalates, rather than what is actually happening to www.brokernews.com.au
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them. We always recommend our brokers have these discussions with their clients over email, because then you have a record of when you sent it, and also the person on the phone is not being required to record anything. “In this area, we have also developed a Repayment Pause Calculator, which has been designed to help mortgage holders work out and understand what the financial impact will be.” (See boxout on p14 for an example of how the Repayment Pause Calculator works.) While the rapidly evolving circumstances over recent weeks have certainly created plenty of challenges in the mortgage space, they may also be paving the way for innovations down the track, as people and businesses have been
the way we communicate doesn’t change that. “The world is saying, ‘don’t come nearby’, but the value proposition that brokers offer is still there – it’s just that the delivery is different,” he explains. “Now you can have a four-way conversation in four different cities on Zoom if you need to. These are unprecedented times, and the lessons we can learn from the past are that those who have kept close to their customers will always become the first point of contact, and the value of the relationship will never be greater than during a crisis. A good customer care program is essential so that you can become the centre of influence, and then you will be able to reassure your clients and manage them through.”
“What the COVID-19 crisis has shown is that borrowers not only need their broker to source a loan, but they are often their first port of call when things get difficult” forced to adapt and problem-solve. Case in point: loan interviews and ID requirements. “Two years ago, we went out to all of our lenders and asked them for a clear policy around conducting a loan interview remotely. We wanted to be clear on whether the meeting had to be what we call ‘belly to belly’, meaning you’re in the room and potentially touching a person, or whether a face-to-face meeting conducted digitally would be acceptable,” Foley says. “We could not get responses from some lenders, and in the end we gave up. It was a constant thorn, as we just couldn’t finish this matrix off. However, in the middle of all this, they’ve now nearly all been able to review their policy and allow contactless meetings to proceed online. It shows that you can still build a very deep personal relationship between brokers and borrowers without necessarily being in the room.” The broker’s key advantage to date has always been that personal connection, he says, and changing 16
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Drawing from past challenges and finding the resilience and agility to pivot in these challenging times is something every business needs to do in order to survive them. No one is immune to current market conditions, Foley adds, but it’s how brokers respond to the crisis and the service and support they provide to their clients that will truly set them up to traverse the uncertain road ahead and come out the other end wiser and with a sustainable business. nMB is taking the same approach by ensuring it focuses on giving its network of brokers the resources they need to meet the challenges of the COVID-19 crisis. “We’re structured in a way that we can move quickly and work with our brokers and help them manage their individual needs. We’ve got enough agility to work with our brokers and adapt as they need help, together with the backing of a really strong balance sheet and a company that’s got brokers in its DNA, which is really positive.” AB
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BUSINESS PROFILE
NON-MAJOR’S BIG GROWTH SPURT Boasting enviable year-on-year mortgage growth of more than 130% in 2019, HSBC is expanding its footprint as one of Australia’s leading non-major banks. Just how has it managed such strong growth, and how has the broker network been key to the bank’s success?
last half a decade represents a period of massive change for the mortgage and finance industry. With record-breaking, booming market conditions in Sydney and Melbourne that saw property values soar, brokers were busier than ever between 2015 and 2017. That is, until APRA stepped in with a raft of measures designed to slow property price growth and avoid an Australian real estate ‘bubble’. Next came a year-long royal commission into financial services, which prompted a number of recommendations that had the potential to truly turn the mortgage industry on its head. It may have been a challenging time, but it’s also created an opportunity for banks and lenders to pivot and innovate, and take advantage of market conditions to truly prosper. This has paved the way for second-tier banks in particular to grow their market share since early 2018. Alice Del Vecchio, head of distribution, retail banking and wealth management at HSBC Australia, says non-major lenders continue to drive “greater competition and a unique perspective to the market”. “Australia has a strong and dynamic banking system that fosters innovation, which is vitally important as consumer preferences evolve,” she says. “For HSBC, empowering our people, continued product innovation, price competitiveness and international connectivity are key to our success in personal banking. We continue to deliver THE
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award-winning products and great service, and our presence in 64 countries and territories worldwide also enables us to use our vast network to provide a strong and differentiated local presence for our customers.” In the last 24 months, HSBC has made significant inroads into the Australian mortgage market, a direction that Del Vecchio says reflects the bank’s “wider ambitions to grow our presence in Australia across each of our businesses, becoming a tangible alternative to the majors”.
supports both brokers and clients, Del Vecchio says. “Our broker partners tell us they value our competitive interest rates, our end-to-end service model, and the dedicated and professional staff that support this channel, capable of dealing with more complex client scenarios,” she says. “Our partnership managers, mortgage care team who triage broker applications, our purposebuilt broker branch that supports onboarding of customers, and our locally based underwriters – all work hand in hand to offer brokers
“We have added more broker partners and several new branches over the past two years, which has significantly increased our distribution capabilities” “In mortgages, we have added more broker partners and several new branches over the past two years, which has significantly increased our distribution capabilities and allowed us to target a far broader customer base with very competitive rates and faster loan approvals,” she explains. “According to APRA figures, HSBC’s year-on-year mortgage growth was 132% in 2019, ranking it fourth among authorised deposit-taking institutions in absolute growth.” Part of this impressive growth comes down to the way HSBC
faster turnaround times and a more personalised service than many of our competitors. “And our customers also benefit by receiving the same level of service and relationship they would if they came to HSBC via any one of our branches here or overseas, or contacted us over the phone.” In the current climate, with the COVID-19 pandemic upending the economy and completely transforming the way we do business, giving customers easy and open access to customer service has become even more essential. As well as working closely with
brokers to ensure customers are able to problem-solve their individual situations as swiftly as possible, Del Vecchio says HSBC has recently introduced several new measures designed specifically to help customers who are currently experiencing disruption to their finances. “These include a reduction in one-, two- and three-year Premier fixed rate home loans for owner-occupiers paying principal and interest, as well as a new 12-month personal term deposit rate of 1.70% per annum for both new and existing eligible customers,” she says. “We’re also providing the opportunity to defer home loan, personal loan and credit card repayments for up to six months, and we encourage any personal banking customer experiencing hardship to contact our team to discuss the most appropriate solution for their individual circumstances.” While the health pandemic is the biggest issue for all Australian businesses right now, there are other challenges that are more specific to the banking and finance industry, particularly the non-major banks. At the centre of it all, in the wake of the royal commission, is the core issue of trust, Del Vecchio says. “Our industry is facing unprecedented change. Regulators and the government want all banks to continue addressing cultural issues and to rebuild trust with their customers, while consumers themselves want their banks to be responsive, transparent, efficient and
In partnership with
Alice Del Vecchio, head of distribution, retail banking and wealth management, HSBC Australia
“HSBC’s year-on-year mortgage growth was 132% in 2019, ranking it fourth among authorised deposit-taking institutions in absolute growth” relentlessly focused on delivering great service,” she says. To this end, HSBC continues to evolve its offering by delivering “competitive home loans and award-winning savings products”. “At HSBC we currently offer one of the lowest home loan rates in the country; we have great flexible savings products and a unique
multi-currency account, Everyday Global, with no overseas transaction or ATM fees,” Del Vecchio says. The bank is also focusing its efforts on digital solutions that can streamline processes and outcomes for customers – such as its recently launched new mobile banking app, and its new rewards program, Everyday Extras.
With Everyday Extras, HSBC customers who deposit A$2,000 or more into their Everyday Global Accounts each month will receive: • 2% cashback when they tap and pay using Visa payWave, Apple Pay or Google Pay on eligible purchases under $100, up to a maximum A$50 cashback each month
• An additional 0.40% bonus interest on the ongoing variable rate of their HSBC Serious Saver Accounts “A competitive landscape gives customers choice and improves the ability for all banks to provide better service to customers,” Del Vecchio adds. “While this is undoubtedly a challenging environment, it’s also an opportunity for all banks to look inwards to their own processes and ensure they’re doing everything they can to support their customers and deliver a great service.” AB www.brokernews.com.au
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BUSINESS PROFILE
CHANGE IS HERE TO STAY At the risk of parroting a profoundly overused phrase, we’re facing unprecedented circumstances. In response, Chris Thomas, NAB’s general manager, commercial, says the bank is ready to play a ‘critical role’ in supporting its brokers and customers through the economic impact of COVID-19
are few people in Australia who remain unaffected by the COVID-19 pandemic. As a health crisis that has evolved to become an economic crisis as well, it continues to evolve further every day – and has “fundamentally changed business forever, in some ways”, says Chris Thomas, NAB’s general manager, commercial. “Normal will be a ‘new normal’ going forward, and I don’t think it will be a short-term economic shock; we will have to rebuild. But first things first – our top priority is to get everyone healthy and safe, and then to start to rebuild and get back to a level of normal,” Thomas says. “NAB is here for the broker partners we support and our customers, and we’re really keen to keep working together through this, and we’re confident that together we can find that future together. I can’t state enough the amazing resilience and the strength of the Australian business community and Australians in general when it comes to finding ways through – it should never be underestimated.” Being Australia’s largest business bank, with customers in THERE
all industries and “really strong relationships in the broker channel”, Thomas says NAB is well positioned to support both brokers and customers on the road ahead, which is going to be a difficult one. “The business environment is going to be quite challenging for some time. It’s hard to predict the length and the depth of it, and the anxiety that comes up around that is justified. But on the positive side, there is also a lot of support on the table. The government, regulators, banks, brokers and aggregators are all working together, and it does provide for real hope that our financial system will continue to support the many customers we service,” he says. “Our broker community are really good at staying close to their customers and having these conversations around how they can communicate with their stakeholders and suppliers, including banks, and work through this.” As quickly as this crisis has unfolded, the government has responded, which is no small feat considering the wide number of unknowns and variables at play.
A raft of measures are now available to both individuals and small businesses, which are not just about keeping the economy going; they’re also about providing reassurance and confidence in our financial system, Thomas explains. “Health and wellbeing is on everyone’s mind, and for us, we’re really focused on the health and wellbeing of our people and our customers. We’re also very keen to keep a real focus on our financial system and how that is serving our community,” Thomas explains. “Wellbeing and caring for each other is where the compass points right now, and that’s where everyone is putting their maximum effort. This affects everyone and all geographies, and this is just the beginning. We’ll have to continue to work together through the health crisis and beyond it. But this will pass – we will get through it.” Importantly, in these early weeks and months of the pandemic’s impact, it’s essential to recognise the opportunities amid the chaos. In the banking and business world, these include the advanced take-up of technology that enables us to
DEFERRED LOANS: SUPPORTING BUSINESS CUSTOMERS NAB has recently announced a number of measures to assist businesses facing financial hardship as a result of the COVID-19 pandemic. “The most significant is deferral of principal and interest for our business customers. This is a really important measure around helping those customers get some breathing space,” says Chris Thomas, NAB’s general manager, commercial. “Where we have commercial real estate customers, we are having very honest conversations with them on the understanding that they will support their tenants; this is where everyone needs to work together to support each other.”
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interact and communicate virtually and using digital platforms. These changes, Thomas says, are going to be here to stay. “I’d say that every week we are gaining a year in advancement in terms of the different ways of working. Technology has presented options for businesses over the last decade that have really only been gradually taken up, and this pandemic has sped up the adoption, because embracing this tech is not a ‘nice to have’ any more – it’s become a pure necessity,” he says. “There have always been questions around how brokers interact with customers: does it need to be face-to-face or can it be done virtually? It’s proven now that it can be done virtually, as there is still a lot of business to be done, despite the health crisis. When you have government sanctions and social distancing, we need to find those ways to ID customers, for instance. We’re moving quickly towards solutions that will allow our brokers to complete ID checks virtually, when in the past we would have sought face-to-face connectively.” A more digitised way of doing business, including employees working remotely and using digital methods to process paperwork (such as DocuSign), is “the potential future we all aspire to”, he adds. “This evolution doesn’t remove the value of the relationships we develop with people; in fact, it enhances it,” Thomas says. “It goes to fundamentals of business and how business is done. Soon, may we hope, people can once again meet up physically, and that holds enormous value
In partnership with
SUPPORT FOR NAB CUSTOMERS Deferral, on application, of business customers’ principal and interest payments for up to six months on a range of business loans. Interest will continue to accumulate on the loan. Automatic 100 basis point reduction on variable rates for small business options loans from 30 March, on top of a 25 basis point reduction earlier in March. Option to take out new unsecured loan of up to $250,000 (lending criteria apply), with no establishment or account fee for up to three years, and no repayments due for six months (for business entities with a combined annual turnover under $50m).
Chris Thomas, general manager, commercial, NAB
“We’ve always had a clear focus around supporting our customers when their financial needs arise, and there’s no bigger need than to help them through this difficult time right now” too – walking the floor and seeing a customer’s business allows quite meaningful conversations to unfold. But the next stage of business will also be about ensuring that things like the processing of loans end-to-end can operate equally as efficiently, if not more efficiently, with digital solutions.” Being well capitalised and ready to play a “critical role” in the global crisis, NAB is working closely with the government and regulators on other necessary measures to support Australians and make sure credit keeps flowing.
During a time of such change, Thomas says the bank aims to support both Australian SMEs and its broker partners in delivering consistency of service. This is something he says NAB has always strived to deliver during challenging times of drought, bushfires, floods – and now, a health pandemic. “We’ve always had a clear focus around supporting our customers when their financial needs arise, and there’s no bigger need than to help them through this difficult time right now,” Thomas explains.
“We rely on the fact that we’ve been in business for 160 years and, as evidenced in recent times, as the largest agribank in Australia. We know the terrible drought conditions our farmers have been facing, and the bushfires and floods – and we’ve supported our customers through all of these. Similarly, in this instance we feel well placed to support even more of our customers going forward.” At the heart of it all is the “fact that Australians always bounce back”, Thomas adds. “I’ve been in banking 33 years, and
Customers can pause business credit card repayments for up to six months, including a threemonth checkpoint.
I’ve never seen anything like this – the pace at which this has unfolded has been confronting, and it is very hard to find parallels with the past. But the way in which everyone has responded has reflected the need for swift action,” he says. “These new ways of working and new ways of doing business beyond this point will continue to evolve – there’s already green shoots appearing. We are at our best in a crisis. This is a health crisis that is turning into an economic crisis, and the spirit of entrepreneurialism in Australia is that you find a way forward.” AB www.brokernews.com.au
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NE WS ANALYSIS
NO ‘PANDEMIC PRICING’ FOR PROPERTY – YET We’ve all been financially impacted by COVID-19 in some way, shape or form. For those who are currently selling a property, the hardest financial hit is expected around lower sales prices – but many experts believe there’s no need for panic selling just yet
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returning home at the end of the First World War, and rapidly moved through all our major cities. “The death toll overseas was horrifically high – estimated to be over 50 million, and the local
them,” Lindeman says. “The government acted quickly by quarantining overseas arrivals, including all returning soldiers and nurses. They closed the schools, churches, theatres, restaurants and
“Once pent-up demand for property is unleashed, we are likely to see values surge” Simon Pressley, MD and head of property market research, Propertyology media whipped up fear and hysteria with alarmist headlines. People panicked and grabbed anything that they thought might protect
hotels, and cancelled sporting events. Even the Sydney Royal Easter Show was cancelled, and war victory celebrations were
SPANISH FLU AND THE HOUSING MARKET 14%
3.0%
12% 2.5%
10% 8%
2.0%
6% 1.5%
4% 2%
1.0%
0% -2%
1918 1919 1920 1921 1922
-4%
0.5%
Annual population growth rate
Capital city house price change
are at the very beginning of this pandemic, which means there are many unknowns surrounding property prices. The only thing that is clear right now is that the majority of people have left the market – both buyers and sellers. Demand has fallen, but so has supply. In the past, when a financial crisis has hit and buyers have been forced to sell, it has had the impact of putting sellers in a vulnerable position, making them more inclined to accept a low-ball offer. However, this financial crisis has not happened on its own. Rather, this is a health crisis that is driving an economic crisis – and once the earth gets back on its axis and confidence returns around employment and income, however long that takes, property markets will stabilise, says Simon Pressley, managing director and head of property market research at Propertyology. “The three years subsequent to both Australia’s last recession and the GFC produced strong increases in median house prices in eight out of eight capital cities and most regional locations,” Pressley says. “Once pent-up demand for property is unleashed, we are likely to see values surge.” Property analyst John Lindeman draws comparisons with the Spanish flu pandemic of 1919, which hit Australia under very similar conditions to the present. Having first spread through Europe in 1918, the pandemic was brought to Australia by soldiers WE
postponed. People wore face masks, and those infected were isolated and the worst cases hospitalised.” This caused some economic and social hardship and disruptions, but by the end of 1919 only 15,000 Australians had died from the Spanish flu, even though 40% of the Australian population had caught the virus. “Our extremely low mortality rate compared to the rest of the world was because the government had acted quickly, limiting the movement and assembly of people. This in turn delayed the spread of the virus and enabled those who needed intensive hospital care to receive it,” Lindeman says. The Australian response to the Spanish flu, which the Morrison government has largely followed with the COVID-19 outbreak, has since become “an internationally accepted model for containing, limiting and ultimately eradicating such pandemics”, he adds. “As for the property market, capital city housing prices didn’t fall at all, as the graph shows. They actually boomed in 1919 and then continued to rise by more than 10% each year until 1921.” Furthermore, until the onset of the pandemic, the fundamentals of the Australian property market were sound, Lindeman says. “Leading indicators suggest that property prices will continue to rise in our major capital cities despite the pandemic, and that they could rise strongly once the coronavirus has become old news,” he says. All of which is to say, we’re not quite at the point of slashing property values to “pandemic pricing” levels just yet. AB
0.0% House price annual change
Population growth rate
Source: John Lindeman; Stapledon’s Index, Long Term Housing Prices in Australia, Nigel Stapledon, UNSW; Australian National Library’s online Trove facility and Mitchell Library archives
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OPINION
TOGETHER WE WILL EMERGE STRONGER The Australian mortgage broking industry has shown its resilience in times of uncertainty. It’s time for us to come together once again to support every Australian in need of credit assistance, writes PLAN Australia CEO Anja Pannek the words of RBA governor Philip Lowe, we are living in extraordinary times. The COVID-19 pandemic is having an unprecedented impact on communities across the globe. While the full economic and social impact of this rapidly evolving situation is difficult to measure, what we can and should be doing is helping each other and our customers. The Australian broking industry has shown how resilient it can be in the face of economic crises, change and uncertainties. We need to remain united – together we can and will overcome challenges and continue to be of service to our customers. The way we live, communicate, socialise and work has been altered as we’ve entered the uncharted waters of the pandemic. For how long and to what extent this disruption will impact our daily lives remains uncertain. At PLAN Australia we are committed to supporting our members and their businesses throughout this time of uncertainty. We are proud to be a strong and sustainable aggregator with the strong capital backing of NAB. Like many organisations, we’ve been working swiftly to respond to COVID-19 and the challenges it presents for our members, business, staff and lenders. We have taken a range of preventative measures to ensure the health and wellbeing of both our members and staff remains our top priority, while continuing to provide the same level of service and support to them. IN
homeowners across the country. You helped your customers through one of the most joyful milestones in life – purchasing a new home. Some of those customers may be feeling anxious about their current situation or overwhelmed by the events unfolding, while others may be experiencing significant changes to their working lives, travel arrangements and social engagements. I encourage all of you to stay close to your clients during these times. They need to know that they have a trusted professional by their side.
Work with customers facing hardship Both the Reserve Bank governor and the Prime Minister have accepted that many Australians are likely to lose their jobs in the event we enter a recession. Some of
Look after yourself and your staff It is also important that we all take the best possible measures to ensure our own personal health and safety and the welfare of those closest to us. Follow both federal
A mortgage broker’s role is vital in assisting customers during the bad times as well as the good
Ensure business continuity planning There are a few important issues brokers should consider at this time. Critically, you should be reviewing your business continuity plans, including: • If you utilise offshore or outsourced loan processing operations, do they have a business continuity plan in place? Are they following local guidance on health and public wellbeing? • If your offshore provider is moving to
remote working arrangements, ensure you understand and are comfortable with their data security arrangements. • Where you move away from face-to-face interactions and hold video meetings, encourage participants to turn the camera on for a more engaging experience. • Ensure your professional indemnity insurance payments are up to date. • Keep connected with your aggregator for further information and support. • Be extra vigilant around your own business’s cybersecurity.
Anja Pannek CEO of PLAN Australia
the unemployed could be your clients. It is critical that you do whatever it takes to keep your business fully operational so you can be of service to clients who are facing financial hardship. A mortgage broker’s role is vital in assisting customers during the bad times as well as the good. There will be many people throughout the community who will need your assistance over the coming months. Many lenders are announcing mortgage and commercial debt repayment breaks and other assistance programs for those affected. There is much brokers can do to support customers who require this help. As business owners, brokers who find themselves in financial hardship as a result of COVID-19 should also speak to their bank about what assistance they can provide. Mortgage brokers have important relationships with more than half of the
and state government and Australian Health directions and advice – please. Social connection is so important, as is health and wellbeing. Stay connected within your broker community and through brokers in your aggregator group. This doesn’t need to be business- or work-related – just a call to check in on each other goes a long way. Importantly, taking care of your own health, with a good diet, sleep and exercise, is more important than ever. We recognise this is a potentially stressful time for many. PLAN Australia, through NAB, offers an assistance program called MyCoach to all its staff as well as PLAN Australia members. MyCoach provides confidential phone counselling and digital support 24/7; we encourage all PLAN Australia members to use this service and reach out for help, should you need it. We are all in this together, and it is together that we will overcome adversity. AB www.brokernews.com.au
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PEOPLE
Get involved in the discussion Share your thoughts at
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FROM THE FORUM
Top comments from trending stories on brokernews.com.au
BANKS UNVEIL RESPONSES TO COVID-19
AGGREGATOR CHANGES VOI POLICY
International and domestic banks have taken rapid action to help financially support people through the economic impact of COVID-19. With KPMG modelling indicating it could take Australia’s economy nearly a decade to recover, even with the government’s stimulus package, major and second-tier banks alike have been announcing new measures to help their customers through this trying time. All the majors have unveiled response measures, include waiving fees, deferral of repayments, and vowing not to increase interest rates.
Loan Market executive chairman Sam White says communication and reliable service is top priority during the COVID-19 epidemic. “This cloud has come over what’s been a really strong start to the year. We’re in this uncertain period again of not knowing exactly how long this virus will go on for and what kind of impact it’ll have.” White said reassuring consumers through uncertain times and ensuring they got the right financial package was “critical”. Loan Market also changed its policy to enable non-face-to-face meetings and the remote completion of verification of identity, effective immediately.
Time to scrap compulsory superannuation for a year to put an extra $80bn p.a. in cash in employees’ pockets to spend and more tax revenue to the Commonweath Government for greater funding to the health system and targeted industry and welfare support.
They forget that the client must be ID’d face-to-face under VOI to meet safe harbour requirements. If they allow Skype as ID, their mortgages may not be valid.
Mark
Hi Marty, It’s a good point on safe harbour, and we are aware of this. However, while it’s obviously ideal to follow the VOI standards, this isn’t mandatory. Obviously lenders have specific requirements that have to be adhered to; however, I’m confident that both regulators and lenders are focused on common-sense approaches to changing requirements in this process, and we’ve had positive feedback and some changes already in response to this situation.
Thankfully we have the pressure of making people switch from principal and interest and interest-only repayments – that should help put cash flow back into the economy... Scott
So switching to interest only is OK when it’s a macro problem that causes cash flow issues, but when someone needs it because of general cash flow issues that are not Covid-19 related then it’s really not OK? Hypocrites.
David McQueen
Spot on, Marty and Scott. APRA and all the fools who thought that forced principal and interest payments, in particular for investors, was a good idea need to give themselves an uppercut.
Thanks, David. I agree with what you are saying, but I still think the vast majority of lenders will not stomach non face-to-face ID of their incoming mortgagors. Most have ... said OK for the brokerborrower meeting to be virtual, but ID still needs to be done via post office, branch, a JP or similar, or ... where the Toll courier comes to the borrower. ZipID. As expected, I think ME Bank may be an exception. Basically, what a lot of brokers have been doing for years.
Broker
Marty
Marty
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Marty McDonald
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24-25_The Forum_Big Deal_SUBBED.indd 24
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PEOPLE
Have an interesting deal? Had a particularly difficult or interesting deal? Why not share it with us? Email:
sarah.megginson@keymedia.com
BIG DEAL
Nancy Youssef, founder and director of Classic Finance, found herself on the other side of the world when dealing with a client’s complex needs – and then things really went pear-shaped THE FACTS
Client Entrepreneur
Loan size $1.8m
Goal To release equity in large portfolio for property purchase
Location NSW
THE SCENARIO
We had a successful entrepreneur client with a high business profile who had built many successful businesses and was toying with the idea of buying another investment property. He approached me before he found the property, to help him work out how much he could afford to borrow and therefore what his buying guidelines would be. The first step in the process was to refinance his existing loans for equity release and obtain pre-approval for a new purchase. Because he had many businesses and some existing properties in his portfolio, there were a lot of moving parts in and around his finances. My team and I bunkered down, and in a short space of time we secured pre-approval for him to borrow up to $1m. It has been a very complicated file with many ups and downs, so I wasn’t sure I’d be able to get it across the line. When we finally crossed all the t’s and dotted all the i’s, I was excited to be able to call the client with the good news. The client was thrilled, because he then had free rein to go shopping for an investment property worth up to $1.25m (as he had a 20% deposit), which gave him plenty of choices. A week later, he called my office and announced he’d made an offer on a property and it had been accepted. His offer was $2m – a full $1m more than the pre-approval we’d secured. And his instructions were: “Make it happen”.
Lender Westpac, SGB and a private lender
Aggregator Connective
THE SOLUTION
Fortunately, he had negotiated a delayed settlement in the contract, which was able to buy us some time. But we really had our work cut out for us!
Cape Town as part of a philanthropic trip, to visit some communities that my charity partner, Human Kind Project, was supporting. Everything was under control at this point, so I left the file with my 2IC with full confidence. My client then called me in Africa, full of anxiety and questions: “When are we going to have approval? Why is this taking so long? Who are we waiting for? What will happen if I lose this property?” There I stood, on the side of the road in Cape Town, leveraging as best I could a dodgy international phone connection in an effort to calm my client down and reassure him that we 100% had his needs top of mind. “No matter what happens, I will find you a solution,” I reassured him. “You have trusted me and I’m not leaving you in the lurch. We always have other options: short-term lenders, bridging finance, private finance and more. We will find a solution!” Fortunately, this is where the trust kicked in, as the client calmed down and regained his trust in the process. I reworked my strategy from the other side of the world, and as it turned out, we
I would hate to work out my hourly rate on that deal, because the blood, sweat and tears that went into it would far outweigh the commission
Nancy Youssef Founder and director of Classic Finance
All of the work we had put into his refinance was now out the window, as we had to do a complete restructure, again, of his existing loans, in order to free up more funds. It was all hands on deck, as every one of my staff members was working on some element of his deal. We negotiated with the bank to get an exception to its existing policies and worked closely with the client’s accountant to get interim financial documents drawn up to prove his income could service the new loans. After numerous back-and forth calculations, we had to involve two banks in the deal, not one, and the goalposts continually changed, but my team and I worked countless hours to harass, negotiate and ‘sweet talk’ them to move the deal forward. Towards the end, I had to go overseas as I was due to spend some time in
did need to get another lender involved, for a short-term loan with a second mortgage from a private lender.
THE TAKEAWAYS
We have never set that precedent of letting a client down in the past, and I wasn’t about to let it happen now. In the end, we got it done. Furthermore, within 12 months we had played a part in improving my client’s financial position by more than $800,000, after he conducted a major renovation and had the property revalued. I would hate to work out my hourly rate on that deal, because the blood, sweat and tears that went into it would far outweigh the commission. But the whole experience reminded me that where there’s a will there’s a way, even though the way can at times be very painful. AB www.brokernews.com.au
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DATA
SOUTH AUSTRALIA
QLD SPOTLIGHT
Rental yields much more ‘attractive’ in Adelaide than in other capitals Adelaide kicked off 2020 as a rental market characterised by strong yields and tight vacancy rates. “Rental yields in SA are much more attractive than in NSW and Victoria – SQM reported healthy vacancy rates for October 2019, with Adelaide at 0.8%, and this rate has been declining since its peak in November 2016 at 2.1%,” says Dennis Wong, property data research specialist at Real Estate Investar. “Rental conditions are attractive for investors in South Australia and much more affordable, with the median house price in the $400,000s and the median unit price in the $300,000s.” The Domain Rental Report for the fourth quarter of 2019 adds that, over the year, the rental rates for both houses and units in Adelaide rose slightly. This means that in the last three years property rents have gone up by nearly 10%, making Adelaide the third fastest growing rental market among the capital cities.
Area
Type Median value
Quarterly
12-month
growth
growth
Adelaide
H
$467,000
0.8%
2.2%
SA Country
H
$275,000
1.4%
3.3%
Adelaide
U
$332,000
-1.4%
1.5%
SA Country
U
$217,000
0.8%
5.9%
WESTERN AUSTRALIA
Rental report shows Perth is the most affordable capital city The Domain Rental Report for the fourth quarter of 2019 showed a rental market with tightening vacancies. The average vacancy rate dropped from 3.5% to 2.5% in the year to December 2019 – a far cry from the 5% peak in 2017. While the rate at which rents have been falling in the past few years resulted in Perth winning the title of most affordable capital city rental market, both house and unit rents took an upwards turn, rising 3% in the year to December 2019. Almost all regions of Perth experienced this boost. The increase in rents was accompanied by an uptick in rental yields – surely excellent news for investors. Nonetheless, Damian Collins, president of the Real Estate Institute of WA (REIWA), still warns buyers to be careful. “While the worst appears over, REIWA cautions against expectations of a rapid recovery during the next 12 months,” he says.
Area
Type Median value
Quarterly
12-month
growth
growth
Perth
H
$480,000
-0.2%
-2.0%
WA Country
H
$330,000
1.2%
0.0%
Perth
U
$375,000
-0.8%
-4.6%
WA Country
U
$213,500
-1.4%
-3.6%
26
FUNDAMENTALS FOR GROWTH The state capital’s property market has been benefiting from Sydney’s uptick in prices growth in December 2019 compared to the previous quarter,” says Dennis Wong, property data research specialist at Real Estate Investar. “Over the past 10 years, Queensland has had consecutive population gains each year and achieved the highest average annual gain of 11,600 people. At the end of June 2018, the Sunshine State had a net interstate migration gain of 24,700 people.” Meanwhile, Ray White Surfers Paradise suggests that the Gold Coast is becoming increasingly attractive to interstate investors, who have acknowledged the region’s ability to weather the recent downturn as a result of its strong regional economy. Domain economist Trent Wiltshire had predicted further price growth, but amid the continually evolving housing market and economy at present, he warns investors to keep their expectations realistic.
COVID-19’s impact began being felt in the economy and in our property markets, Brisbane was on track for modest price growth in 2020. It recorded what CoreLogic’s Home Value Index for December 2019 described as “the strongest growth conditions” among the capital cities, as property values rose by 0.7% over the month. House price expectations were high for Queensland’s capital, according to the 2019 ANZ/Property Council Survey on consumer sentiment. The 2019 Property Investor Sentiment Survey conducted by Your Investment Property, Property Update and Onthehouse indicated that, out of almost 2,000 investorrespondents, 37% owned investment properties in Brisbane. “The Queensland property market has started to show signs of growth, as CoreLogic reported Brisbane with 2.4% BEFORE
OPPORTUNITIES AND KEY INFRASTRUCTURE
$49.5bn infrastructure plan
$460.9m Logan Hospital expansion
Queensland’s current four-year plan to create more development, jobs and growth
Update includes additional wings, 206 beds, 28 recovery spaces, and endoscopy suites
$1.143bn Gateway Upgrade North project
$515m targeted regional infrastructure program
Improved connectivity of local road networks to rural areas and airports
Funds invested in transport and regional infrastructure
SUBURB TO WATCH: ROBERTSON Median price (houses) $1,004,248
Median price (units) $343,364
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
0.2%
2.4%
26.2%
2.6%
12-month growth
3-year growth
5-year growth
Indicative gross rental yield
-5.0%
-9.6%
-4.6%
7.1%
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AUSTRALIAN CAPITAL TERRITORY
High house price expectations but low buyer sentiment The 2019 Property Investor Sentiment Survey, conducted by Your Investment Property, Property Update and Onthehouse, ranked Canberra above only Darwin in terms of capital growth potential for investors in the next five years. The findings of the ANZ/Property Council Survey for March 2020 supported this: while house price expectations were high for the ACT, buyer sentiment dropped considerably. A possible factor is the difficulty of financing a property in Canberra, even with the new First Home Loan Deposit Scheme (FHLDS). “Under the FHLDS, high-income earners are being offered the same advantage as lower-income earners. It may actually provide more advantage to those earning towards the top of the threshold,” says Eliza Owen, CoreLogic’s head of residential research in Australia. “The scheme is currently limited to 10,000 guarantees a year, awarded on a ‘first in, first served’ basis.” Area
Type Median value
Quarterly
12-month
growth
growth
Canberra
H
$694,000
0.8%
2.3%
Canberra
U
$450,000
1.2%
0.8%
NORTHERN TERRITORY
Slump in demand for Darwin’s house and unit rentals
HIGHEST-YIELD SUBURBS IN QLD Suburb
Weekly median
Type
Median price
Quarterly growth
12-month growth
Holloways Beach
U
$130,000
-13%
-30%
$300
12%
Hoe Hill
H
$105,000
-16%
-32%
$240
12%
Bundamba
U
$132,750
-44%
-44%
$295
12%
East Innisfail
H
$140,000
-10%
-14%
$300
11%
Monto
H
$96,000
-17%
-3%
$200
11%
Dysart
H
$105,000
6%
30%
$220
11%
Hermit Park
U
$122,500
-2%
-23%
$250
11%
Edmonton
U
$135,000
-1%
-10%
$269
10%
advertised rent
Gross rental yield
Blackwater
H
$132,000
-13%
42%
$260
10%
AYR
U
$107,000
-33%
-45%
$210
Mundubbera
H
$144,000
-6%
-10%
Murgon
H
$120,500
-2%
-20%
Rental demand has dropped steadily since the mining downturn began, with the Domain Rental Report for the fourth quarter of 2019 showing that both house and unit rents fell over the year in Darwin. More recently, the rental market appeared to reach a turning point, as vacancy rates dropped as well. Darwin’s rental yield remained the highest among the capital cities – 5.9% according to CoreLogic’s Home Value Index for December 2019 – and the rate at which dwelling values declined was greater than the rate at which rents did. Meanwhile, in its Month in Review for December 2019, Herron Todd White also reported that house and land construction in new estates located in Darwin and Palmerston was creating opportunities in established suburbs. As a result of the NT government’s Build Bonus Grant, market activity is concentrating on land sales and new builds; in turn, properties in established areas are showing greater value for money.
Area
Type Median value
Quarterly
12-month
growth
growth
Darwin
H
$480,000
-0.8%
-2.8%
10%
NT Country
H
$395,000
-3.1%
-5.1%
$280
10%
Darwin
U
$280,000
-3.2%
-13.0%
$230
10%
NT Country
U
$314,500
3.3%
-0.6%
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DATA
TASMANIA
While Hobart’s housing values hit a record high, their affordability still appeals CoreLogic’s Home Value Index for December 2019 showed that regional Tasmania’s property market was the highest-growing regional market in the 2019 calendar year, with a 6.1% increase in dwelling prices. Yet it remains very affordable, especially for buyers from outside the state. “Buyers are attracted to affordable prices coupled with job opportunities and lifestyle factors; smaller capitals, as well as key regional centres and lifestyle markets, could see an improvement in conditions,” said CoreLogic head of research Tim Lawless. Hobart’s housing values are at a record high, and the city remains the tightest capital city rental market, which caused rental rates to shoot up by 6% over 2019 – driven by low levels of residential construction leading to limited supply on the rental market. While renters have become challenged in this market, initiatives such as increased production and building approvals will work in their favour. Quarterly
12-month
growth
growth
Hobart
H
$502,000
1.8%
6.7%
TAS Country
H
$325,000
1.6%
5.0%
Hobart
U
$370,500
1.4%
7.1%
TAS Country
U
$257,500
0.0%
2.0%
Quarterly
12-month
growth
growth
Sydney
H
$969,000
0.6%
-4.8%
NSW Country
H
$485,000
1.5%
1.1%
Sydney
U
$720,000
0.0%
-3.4%
NSW Country
U
$415,000
0.0%
1.2%
28
111
Cleared
16
Uncleared
41 28.1%
Clearance rate
PERTH Total auctions
30
Cleared
3
Uncleared
10 30.0%
Clearance rate
Houses
$900,000
Units
$0
Sydney Melbourne Brisbane
Adelaide
Perth
Hobart
Darwin
$447,000
$687,500
$522,500
$433,750
$497,505
$335,000
$100,000
$443,500
$200,000
$335,500
$300,000
$450,000
$500,000 $400,000
$383,000
$600,000
$500,000
$700,000
$540,500
$800,000
$671,550
Sydney’s rental market experienced an increase in rental supply late last year, according to the Real Estate Institute of NSW (REINSW) Vacancy Rate survey for December 2019. In inner-ring suburbs, average vacancy rates rose from 2.4% to 3.4%. “The increase in vacancies in Inner Sydney shows tenants now have a lot more choice in many metropolitan areas,” says REINSW CEO Tim McKibbin. With COVID-19 stalling the economy and putting the brakes on demand for rental accommodation, this vacancy rate could increase in the weeks and months ahead. “The issue of quality can be expected to remain at the forefront of buyers’ minds,” adds Leanne Pilkington, president of REINSW. “In the wake of the Opal and Mascot Towers experiences, the cladding issue and other scrutiny around the quality of new buildings, both owner-occupiers and investors can be expected to intensify their due diligence processes. This means the development community will have to work harder to set buyers’ minds at ease.” Type Median value
Total auctions
MEDIAN HOUSE AND UNIT PRICES
Sydney sees a rise in rental supply, but investors remain cautious
Area
ADELAIDE
$233,500
NEW SOUTH WALES
The week ending 29 March was set to be the busiest of the year, with 3,203 homes scheduled for auction across the combined capital cities. With the disruption of new policies preventing onsite auctions, the auction withdrawal rate surged over the weekend as 40% of auctions were pulled, up from 7.5% a week earlier. The high withdrawal rate weighed on the preliminary clearance rate, which dropped to 51.4% – the lowest reading since June 2019. The surge in withdrawn auctions was anticipated, considering the rising level of uncertainty among both buyers and sellers, coupled with the shift towards remote auctions, which may take some time for the market to adjust to. There was also a surge in the proportion of properties sold prior to auction, lifting from 22% of the preliminary collection last week to 36% this week. Overall, a substantial drop in new property listings is expected, regardless of the selling method, as buyers and sellers retreat to the sidelines and wait for some certainty to return to their decision-making.
$650,000
Type Median value
WEEK ENDING 29 MARCH 2020
$800,000
Area
CAPITAL CITY AUCTION CLEARANCE RATES
Canberra
CAPITAL CITY HOME VALUE CHANGES Capital city
Weekly change
Monthly change
Year-to-date change
12-month change
Sydney
0.1%
1.0%
3.9%
13.0%
Melbourne
0.1%
0.6%
3.1%
12.2%
Brisbane
0.2%
0.6%
1.7%
3.2%
Adelaide
0.0%
0.4%
0.7%
1.1%
Perth
0.2%
0.5%
0.9%
-2.9%
0.1%
0.8%
3.0%
9.2%
Combined 5 capitals
*The monthly change is the change over the past 28 days
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BRISBANE CANBERRA Total auctions
90
Cleared
33
Uncleared
18
Clearance rate
Total auctions
184
Cleared
26
Uncleared
54
Clearance rate
32.5%
64.7%
SYDNEY Total auctions
1,263
Cleared
408
Uncleared
454 47.3%
Clearance rate
TASMANIA
MELBOURNE Total auctions
1,517
Total auctions
8
Cleared
441
Cleared
0
Uncleared
311
Uncleared
1
Clearance rate
Clearance rate
56.8%
MELBOURNE
Area
Melbourne records a 5.3% increase in average capital gain CoreLogic’s Home Value Index for December 2019 shows that Melbourne equalled Sydney in recording the highest average annual capital gain as the year closed, with an increase of 5.3%. The premium sector of the market experienced spectacular growth as the top quartile recorded a 7.6% increase in prices across 2019. Values in the lower quartile of the market rose by 3.7%. The Inner East pocket of Melbourne was the leader in capital city subregions, with property prices up by 12.1% in the same period. Outside the metro, the Warrnambool and South West regions were the top growers among non-capital city subregions. However, the ANZ/Property Council Survey revealed that consumer confidence in Victoria’s commercial property market is low, given the sluggishness of the office, tourism and retail sectors.
n.a.
Type
Median value
Quarterly growth
12-month growth
Melbourne
H
$745.000
1.0%
-2.4%
VIC Country
H
$381,500
1.8%
4.8%
Melbourne
U
$586,000
2.8%
4.5%
VIC Country
U
$307,000
4.7%
9.0%
All data sourced from CoreLogic.com.au
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PEOPLE
Aggregator Choice
IN THE HOT SEAT
With three decades of experience behind her, Louisa Sanghera, director and principal broker at Zippy Financial, has seen the finance world evolve through many ups and downs – and she believes there’s plenty of scope for future improvement
Tell us about your first job – have you always worked in the finance industry? school and went straight into banking, working for banks – owned A Ibyleft NAB – in the UK for over 20 years, before I left to have my children. Once back from bringing up my children, I came into the crazy but wonderful world of mortgage broking.
Q
During your career in finance, what has surprised you the most? Having come from the UK to Australia 15 years ago, it has really A surprised me how much power the big banks have in this country, and their strong relationships with the government.
Q
What is one thing you wish everyday borrowers knew about finance, debt and/or brokers? I wish borrowers understood that their banks are not loyal to A them and that they have a better chance of approval and saving money by coming to a broker. We are getting there as an industry, and I am convinced that the brokers’ share of mortgage applications will only continue to rise in the coming years.
Q
Name one positive change, innovation or efficiency to come out of the COVID-19 pandemic? A It’s great that the banks are finally allowing us to interview on Zoom – this saves me several hours per day. It allows people to sit in the comfort of their own home and talk to us, and my clients are loving it. I really hope this continues to be the case once this is all over.
Q
If you could change anything about the broking industry, what would it be? One: that clawback be stopped, as it’s just wrong – we all know it, but A no one appears to be really attempting to fight this, despite the fact that broker remunerations have been reduced over the years and the cost of us doing a mortgage has risen dramatically. We make a loss on small mortgages too, so the banks should pay us a minimum fee for a mortgage to not only cover our costs but give us some income on the small deals. Two: that aggregators are not allowed to be owned and influenced by banks. All aggregators should be supporting and fighting for their brokers. We’ve seen independently owned aggregators do this well in the past 12 months, but others have been very quiet or have been following the banks’ party line.
Q
30
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