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SERVICEABILITY NO LONGER THE BIGGEST CONCERN Many barriers still stand in the way of fi rst home buyers obtaining fi nance, says the Housing Industry Association’s chief economist
Housing Industry Assocation has used the release of its a ordability index to highlight the many barriers that stand in the way of fi rst home buyers obtaining fi nance.
While the index showed that the ratio between income levels and the cost of mortgage repayments compared favourably with “much of the last 20 years”, HIA chief economist Tim Reardon explained that serviceability was no longer the most pressing concern in a borrower’s home loan journey.
He said, “Servicing a mortgage is not the constraint on homeownership that it has been in the past. The sticking point facing the current generation of THE aspiring homebuyers in obtaining a mortgage in the fi rst place – this relates to the lengthening of the time it takes to save a deposit, and then meeting the increasingly stringent requirements of lenders. “The tightening regulatory environment the banking sector has faced over the last decade has forced lenders to eliminate much of the fl exibility in the mortgage market that made homeownership accessible for fi rst home buyers.”
Structural changes in the banking sector have meant that even if a fi rst home buyer has su cient income to meet serviceability requirements, they often borrow a high proportion of
the property value and closer to their capacity, which leads them to be considered a higher risk.
“Through a decade of fi nancial sector reforms, banks have been required to increase the value of assets they hold when lending for the types of home loans typically used by fi rst home buyers, [making] it increasingly expensive to lend to fi rst home buyers,” said Reardon.
“Tighter scrutiny of household budgets and measures imposed to restrict interest-only loans apply on top of these changes. This is having the e ect of forcing fi rst home buyers to achieve a deposit of greater than 10%.”
A decade ago, in 2009, lending to homebuyers with a deposit of less than 10% of the property value comprised over 20% of new lending. Now, it accounts for just 7% of new loans.
“Reducing risk of lending to fi rst home buyers comes at a cost, and that is the decline in homeownership,” Reardon said. THE cash rate has been kept on hold at its current record low of 0.75%, where it has sat since October 2019. Following the release of the latest data, which showed a lowered unemployment rate and an uptick in the inflation rate, the outcome of the RBA’s February meeting was generally expected. Regardless, brokers should still anticipate a rise in market activity, says Loan Market executive chairman Sam White. RBA ANNOUNCES FIRST CASH RATE OF 2020
APRA has announced it will expand its quarterly property data publication to include “new and more detailed statistics” on residential mortgage lending. The change will not only contribute to APRA’s goal of becoming a more transparent regulator but is intended to enable “more in-depth market analysis” by analysts, media and other interested parties. Consultation will also continue on a proposal for its data sources to become non-confi dential. APRA TO SHARE MORE MORTGAGE DATA
Tim Reardon, Chief economist, HIA
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IN under three weeks, a challenger bank has seen 15,000 customers make $100m in deposits, “smashing its business plan many times over”. Xinja Bank launched its new digital bank account Stash on 15 January with an ongoing interest rate of 2.25% from the fi rst dollar invested up to a maximum of $245k. Xinja CEO and founder Eric Wilson said the staggering fi gure showed that consumers were not only willing but excited by “the opportunity to embrace the digital banking revolution”. CUSTOMERS INVEST $100M IN NEOBANK
SUPPLY chain fi nance will become the “funding model of choice” for the majority of SMEs over the next fi ve years, and the reverse factoring model should be used responsibly as a stimulus for the SME sector, Fifo Capital has said. “Reverse factoring works at its best when the supplier uses it at chosen times to fund growth and invest so the burden and benefi t of liquidity can be shared throughout the supply chain,” said CEO Wayne Morris. THE SME FINANCE TREND TO WATCH
Wayne Morris CEO, Fifo Capital
OVERVIEW: THE STATE OF HOUSING ACROSS AUSTRALIA The latest research reveals how the Australian housing market has performed over the last few decades
has released its latest quarterly report, which compares recent housing data with decade averages – or the ‘normal’ performance – for each state and territory.
In six of the states and territories, as compared to four previously, trend housing fi nance commitments came in above decade averages. Additionally, in all states or territories with the exception of the NT, trend home loans were above the levels of one year ago.
The ACT remains in the top spot, with the value of home loans up by 33.8% on the long-term average. Next strongest is Tasmania, up 33% on decade averages, followed by NSW, up COMMSEC 32.3%, and Victoria, up 31.1%. The NT remains the weakest for housing fi nance, with trend commitments 36% lower than the decade average.
Commitments in WA were down 16.2% on the decade average, followed by Queensland, up 14.6%, and SA, up 19.1%.
In terms of annual comparisons, NSW housing fi nance commitments were up the most at 17.2%, while Victoria was up 12.3%. The NT had the weakest annual comparison, with trend home loan commitments down 16.2% on a year ago. Next came the ACT, which was up 0.8%.
Home-building fi gures were strong in Tasmania, with population growth being well above ‘normal’ and the building industry struggling to keep up with the demand for homes.
This kept Tasmania in the top spot for dwelling starts, ahead of Victoria and NSW.
In trend terms, dwelling starts in Tasmania were 10.3% above decade averages, making it the only state or territory with starts above the decade average.
Victoria took second place, with starts down 5.2% on decade averages, while NSW was down 6.2% and the ACT 6.4%.
Overall, considering all eight key indicators of economic growth that CommSec analyses in its research – retail spending, equipment investment, unemployment, construction work, population growth, housing fi nance and dwelling commencements – Victoria remained the bestperforming economy.
Tasmania claimed the second spot, with NSW close behind. Separated by a wider margin, ACT came in fourth.
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TECHNOLOGY DRIVING ENTREPRENEURIAL GROWTH FOR AYERS FINANCIAL GROUP
WITH a 40% year-over-year increase in settlement volume, Ayers Financial Group is on an impressive growth trajectory. According to Mark Lai, Ayers Financial Group’s Head of Operations, a laser focus on driving service excellence in its core market by leveraging cuttingedge technology is the ‘secret sauce’ for this multi-awardwinning brokerage’s success.
“We’re still a small group, but we’re fast-growing and dynamic,” says Lai.
“Because we’re still a young operation we’ve been able to concentrate on implementing technological elements into our business operations, and streamlining the process so that we can capitalise on our online presence and ensure compliance is met.
“Our growth has been largely due to word of mouth, specifi cally within the Australian-Asian community, with whom we work very closely.”
Lai notes that many of Ayers Financial Group’s clients are high-net-worth professionals who expect and demand outstanding service and a fast, glitchfree operation. So maximum e ciencies at point of sale and in back-o ce operations, along with the guarantee that supplied information is stored in a secure manner, are paramount. “NextGen.Net’s ApplyOnline platform is the gateway to all our submissions,” Lai says. “ApplyOnline has always been the leading gateway for brokers to submit their applications to lenders. So it was very natural for us to choose it as our core electronic lodgement platform. “Our mortgage support team loves ApplyOnline because it indexes all the documents and makes it the fastest and most e cient way for lenders to receive supporting documents.”
He deems the new version of the ApplyOnline ‘Supporting Documents’ service a winner, saying, “We love the drag-anddrop feature where we can upload multiple documents at once but still have the option to go into a specifi c folder to upload any individual fi le.”
He adds that the Supporting Documents service “reminds brokers to tick o each lender’s requirements and minimises the delay in credit assessment”.
One of Lai’s principal initiatives is achieving a paperless o ce.
“Our o ce has been adapting to the paperless model since the start of 2019 and already we’ve reduced our paper usage by over 50%,” he declares.
“We use platforms like Salestrekker, which is our CRM; CashDeck, which retrieves bank statements from clients; and DocuSign, which allows brokers and clients to provide e-signatures on documents. “It’s working well. It’s good for the environment and efficient for our brokers as ApplyOnline integrates directly with Salestrekker and DocuSign through the ApplyOnline ‘eSign’ tool. “ApplyOnline Supporting Docs is exactly how a paperless o ce should work,” Lai says. “Traditionally the method was to retrieve documents from clients, print them out and put them back into the computer. Instead we now get the documents from the client, ensure they’re legible, review them and then upload them to ApplyOnline.” He laughs when asked if he’s encountered any resistance to his paperless o ce initiative. “Defi nitely! That’s human nature, but I tell the team that just because we’ve always done things a certain way doesn’t mean that it’s the right way. We need to have an open mind if we want to succeed.”
Success for Ayers Financial Group is about “empowering both brokers and clients Mark Lai, Head of Operations, Ayers Financial Group
to achieve more thorough education, and recognising which lender has their best interest at heart”.
“Our key goal for this year is to increase our distribution team by attracting more experienced finance brokers and mentoring new entrants in the industry,” Lai says.
“We will also be looking to introduce our white label products to the consumer market, which means it’s a very exciting year ahead of us.
“Our medium-term goal is to become a fully licensed financial service firm offering a broader range of financial products to both individual and corporate clients.”
Lai sees technology such as the ApplyOnline platform playing a crucial role in growing Ayers Financial Group’s business. He says, “Technology will continue to grow and become more competitive as new neo-lenders emerge in the fi nancial services industry.
“So, we (as a small business) have to continue to innovate and step up our game; and technology enables us to level the playing fi eld and deliver on our customer service excellence promise with maximum e ciency and e ectiveness.”
NEW LEGISLATION ‘TARGETS MISCONDUCT’ BY MORTGAGE BROKERS Draft legislation will address compliance concerns and enforce the requirement for doing background checks on prospective brokers and advisers
government has released the draft legislation implementing 22 recommendations and two additional commitments that arose from the Hayne Royal Commission. These include recommendations 1.6 and 2.7, which establish a compulsory scheme for checking references of prospective fi nancial advisers and mortgage brokers.
Before the royal commission began, under ASIC’s Regulatory Guide 104 both Australian fi nancial services licensees and Australian credit licensees were meant to undertake appropriate background checks before appointing new representatives, through referee reports, searches of ASIC’s register of banned and disqualifi ed persons, or police checks. THE However, despite this requirement’s existence, the royal commission found that fi nancial services licensees weren’t doing enough to communicate the backgrounds of prospective employees among themselves, highlighting that licensees “frequently fail to respond adequately to requests for references regarding their previous employees” and do not “always take the information they receive seriously enough”.
Financial advisers facing disciplinary action from an employer were therefore able to simply leave and fi nd another to employ them.
Recommendations 1.6 and 2.7 seek to address this systemic weakness. The latter looks to promote better information
sharing about the performance history of fi nancial advisers, focusing on compliance, risk management and advice quality, while the former makes sure this change is extended to mortgage brokers as well.
According to the draft legislation, the reporting obligation “targets misconduct by and serious compliance concerns about individual mortgage brokers” and “recognises that in the industry, other parties such as lenders and aggregators are often well positioned to identify this misconduct”.
The new law states that both Australian fi nancial services licensees and Australian credit licensees are subject to a specifi c obligation to undertake reference checking and information sharing regarding a former, current or prospective employee. Australian fi nancial services licensees and credit licensees who fail to undertake reference checking and information sharing regarding a prospective employee will be subject to a civil penalty.
EARLIEST DATA FROM FHB SCHEME
THE National Housing Finance and Investment Corporation (NHFIC) has shared the earliest data available from the First Home Loan Deposit Scheme’s fi rst month of operation. The preliminary fi gures provide insight into the specifi c types of borrowers benefi ting from the initiative. The NHFIC said the fi rst 3,000 homebuyers with pre-approvals under the scheme had been distributed through every state and territory and divided among capital cities, large regional centres and regional areas.
NEW ATO RULES WILL PUSH SME S TO PAY TAX DEBTS
SMES using the ATO “as a bank” by not paying tax commitments on time face new risks, national business funder Scottish Pacifi c has warned. Many business owners are still unaware of laws passed late last year that would allow the ATO to reveal SMEs’ tax debts to credit reporting bureaus, according to Scottish Pacifi c senior executive Wayne Smith. He said trusted advisers, accountants and brokers played a key role in making business owners aware of the implications.
Glen Spratt Managing director, Mortgageport
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ACCC FORMALISES OPEN BANKING RULES
THE ACCC has formally released the Competition and Consumer (Consumer Data Right) Rules. This has been heralded as a “key development” in integrating CDR into banking. In addition to legally requiring the four major banks to share product reference data with accredited recipients, the rules clarify the parameters of the new system and give “legislative force” to the obligations in banking that become mandatory from 1 July 2020, detailing the rights, responsibilities and possible penalties for all parties involved.
NON-BANK LAUNCHES ‘BANKLESS’ OVERDRAFT
THE ‘bankless’ business overdraft of non-bank lender GetCapital is seeking to establish itself as a core working capital solution for brokers, fi ve months after launching. Following the move of traditional banks to signifi cantly reduce lending to small businesses, GetCapital said it saw an opportunity to o er a standalone business overdraft to serve as working capital for growing businesses of varying sizes. “GetCapital is entering a territory that has been traditionally held by banks,” said CEO Jamie Osborn.
CBA LAUNCHES APP FOR FASTER LENDING DECISIONS
CBA’s updates and new initiatives for its small business banking division include a commitment to providing faster access to funding
MORE than 93,000 existing CBA business customers have already made the switch to the bank’s new business account o ering zero monthly account fees, and over 27,000 new accounts have been opened.
“Our small business customers have wanted more from us and we’ve been working hard to make the improvements they’ve asked for – like faster access to cash fl ow, more specialist bankers, and fewer fees,” said Clive van Horen, executive general manager of business customer solutions.
“Small businesses are often the fi rst to feel the pinch from shifts in the broader economy. As Australia’s largest bank, it is imperative we listen to these businesses, back them, and try to make it easier for them to innovate, invest and grow.”
As part of this e ort, CBA has created more than 120 new sta roles, with a larger pool of business bankers in its Australian phonebased business centres and more managers in branches in “key geographic areas”.
The bank has also launched BizExpress, a business lending application that provides small businesses with faster lending decisions and faster funding for loans up to $1m.
“We fully acknowledge there is a concern in the small business community that it is getting harder to access credit. We currently lend more than $500m to Australian businesses every week and have the capacity and appetite to do much more,” said van Horen. “BizExpress can provide our eligible small business customers with a lending decision in minutes, enabling faster access to the funds they need to keep them growing. “The nature of small businesses is such that they require quick access to funding, whether it’s to capitalise on opportunities, cover debts or cash fl ow, or purchase equipment.”
The bank has also been removing more business banking fees, including all electronic transaction fees, from its business accounts. Its more fl exible Business Transaction Account was opened in November, o ering a price option with zero monthly account fees for customers who prefer to bank online.
TOTAL FINTECH APPLICATIONS RECEIVED AND LICENSED BY APRA SINCE 2017
25
20
15 Total applications received Total applications licensed
Source: APRA
10
5
0 Jul-17 Jan-19 Sept-17 Mar-19 Nov-17 May-19 Jan-18 Jul-19 Mar-18 Sept-19 Nov-19 May-18 Jul-18 Sept-18 Nov-18
