BROKERS ON NON-BANKS Revealing the sector’s top performers for 2023
MPAMAGAZINE.COM.AU ISSUE 23.05 22.04
LENDING TO SMALL BUSINESSES Positive signs ahead for business finance INDUSTRY ROUNDTABLE Major banks, brokers talk challenges, opportunities
TAKING ON CLAWBACK
Reform is essential, says LMG executive chairman Sam White
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OCTOBER 2023
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CONTENTS
Got a story or suggestion, or just want to find out some more information? twitter.com/MPAMagazineAU facebook.com/Mortgage ProfessionalAU
UPFRONT 02 Editorial
28
04 Statistics
Signs of a housing recovery
06 Opinion
FEATURES
Every broker can create their own masterpiece, says the FBAA’s Peter White
Participants discuss the challenges of a changing market and the value of strong broker partnerships
FEATURES
MAJOR BANKS ROUNDTABLE
12
Brighter days ahead for brokers and borrowers
44 Broker partnerships
Brokers’ top non-bank for BDM support is continuing to deepen its relationships with brokers
66 Embracing digital
Why brokers need to look to new tech if they want to remain competitive
SPECIAL REPORT
BROKERS ON NON-BANKS 2023
Brokers vote for their top non-banks and reveal what they value most about working with them
48 FEATURES
LENDING TO SMEs
BIG INTERVIEW
SAM WHITE
Non-bank lenders share their insights on the SME market and how they can work with brokers to support small businesses
LMG’s executive chairman gives his views on the clawback of commissions and explains why reform is essential
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58 FEATURES
BACKING FIRST HOME BUYERS Lenders and brokers are helping keep Aussies’ dream of homeownership alive
PEOPLE 70 Brokerage insight
Indigo Finance founder Melanie Cunliffe has a passion for empowering clients as well as her team
72 Other life
Broker Anthony McDonald has learnt important lessons from raising cattle
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1
UPFRONT
EDITOR’S LETTER
Brighter times round the corner
S
pring has a habit of lifting people’s moods and creating a sense of optimism and hope. It’s a time to clear away the clutter, start afresh and move on to new projects and the promise of better things to come. Mortgage holders have done it tough so far in 2023, coping with multiple cash rate rises, higher inflation and an economy hit by supply chain problems, labour shortages and a sluggish property market. Brokers have felt the pain too. They’ve been working hard to help customers seeking to refinance to a better home loan rate, as well as the thousands of people rolling off low fixed rate loans on to much higher revert rates – and some clients are really struggling. With fewer first home buyers and investors transacting in the market, brokers have had to rely on refinancing existing customers or diversifying into commercial, asset and SMSF lending to protect their income streams. But just as spring engenders positivity, things are looking up for the mortgage and finance industry. At the time of going to press, the Reserve Bank of Australia has kept interest rates on hold at 4.10% for the fourth month in a row, and both the central bank and most economists are suggesting the rate hiking cycle has reached its peak, with possibly only one more increase to come, depending on market conditions.
There are early signs that spending is beginning to recover, property prices are rising and supply issues are improving The RBA’s lifting of the cash rate 12 times in just over a year appears to have done its job in terms of keeping a lid on inflation. There’s even the likelihood of rate cuts in 2024 to look forward to. In the more immediate future, there are early signs that spending is beginning to recover, property prices are rising and supply issues are improving. As more international students and other migrants flock into Australia, labour shortages should also ease. While it will take a long time for the economy to fully recover, the trends suggest we are past the worst problems and brokers should start to see a bounce in their bottom lines as residents and businesses gain a greater appetite for finance. In this October edition of MPA, we explore how major banks are navigating a higher interest rate environment and strengthening their partnerships with brokers, as discussed at the 2023 Major Banks Roundtable. We also take a look at how lenders are servicing the first home buyer sector, the opportunities available in SME lending, and the importance of technology in broking. And we unveil the results of Brokers on Non-Banks 2023. We hope you enjoy reading this edition. Antony Field, editor, MPA
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www.mpamag.com/au OCTOBER 2023 EDITORIAL
SALES & MARKETING
Editor Antony Field
Publisher Claire Tan
Writers Kim Champion, Mina Martin
CORPORATE
Contributor Peter White
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ART & PRODUCTION
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GUEST SPEAKERS
UPFRONT
STATISTICS AUSTRALIAN PROPERTY MARKET IN NUMBERS
11 million
HOUSING RECOVERY GAINS MOMENTUM CoreLogic’s national Home Value Index lifted 0.8% in August, marking a sixth consecutive monthly rise and a slight acceleration from the 0.7% increase the previous month. The median dwelling value has risen by 4.9%, or roughly $34,301, since bottoming out in February.
Total number of dwellings
MONTHLY CHANGE IN HOME VALUES, AUGUST 2023 1.5%
1.5%
1.2% 1.1%
1.1% 0.9% 0.6% 0.5% 0.3% 0 -0.3%
56.3%
-0.6%
NSW
Vic
Qld
SA
Proportion of household wealth held in housing
DWELLING APPROVALS CONTINUE DOWNWARD TREND
$2.2trn
The number of dwellings approved fell 8.1% in July, in seasonally adjusted terms, driven by a drop in private sector dwellings excluding houses, which slipped 15.8%, ABS data shows. The latest decline in dwelling approvals followed a 7.9% decrease in June.
DWELLINGS APPROVED: JULY KEY FIGURES
Outstanding mortgage debt
Number of dwellings
Monthly change
Yearly change
Seasonally adjusted Total dwelling units approved Private sector houses Private sector dwellings excluding houses
$9.9trn
Value of residential real estate
Source: CoreLogic Monthly Housing Chart Pack, August 2023
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12,668 8,084 4,367
-8.1%
-10.6%
0.1% -15.8%
-16.9% 3.4%
Trend Total dwelling units approved Private sector houses Private sector dwellings excluding houses
13,618 8,105 5,190
1.6%
-15.1%
0% 3.4%
-17.4% -13.1% Source: ABS Building Approvals Australia, July 2023
NEW LISTINGS RISE AHEAD OF SPRING New listings added to the Australia housing market rose by 13.2% between autumn and winter this year, driven mainly by a 17.9% lift across the capital cities compared to a 4.6% increase across the combined regional areas, CoreLogic reports.
FLOW OF NEW LISTINGS, 4 WEEKS TO 13 AUG*
0.9%
0.8%
0.8%
0.9%
0.3% 0.1% -0.1%
-0.2%
-0.6%
WA
Tas
NT
Canberra
Regional Regional Regional Regional Regional NSW Vic Qld SA WA
New listings
Compared to last year
Compared to previous 5-year average
Sydney
6,870
10.9%
22.6%
Melbourne
7,282
9.7%
25.5%
Brisbane
3,673
-9.7%
-5.7%
Adelaide
1,488
-10.2%
-0.6%
Perth
3,285
-8.8%
-1.9%
Hobart
279
-2.4%
-3.7%
Darwin
163
-36.3%
-7%
Canberra
634
2.4%
11%
Combined capital cities
23,674
1.5%
11.8%
Combined regionals
11,553
-11.7%
-10.5%
National
35,227
-3.2%
3.3%
*Unique listings are counted over a rolling four-week period, with the most recent period ending 13 August 2023 Source: CoreLogic
Source: CoreLogic Home Value Index
RENTAL VACANCY RATES SLIP AGAIN
AUSSIES’ HOUSEHOLD SPENDING DIPS
National rental vacancy rates declined again in July, dropping 0.04 percentage points to 1.43%, signalling that rents will likely increase further in the months ahead as tenants compete over extremely limited stock, PropTrack reports.
Australian households tightened their purse strings over the year to July 2023 amid higher interest rates and inflation, with household spending down 0.7% on the previous year, ABS data shows. Leading the declines was the NT, where spending dropped by 6.7%, driven by falls in spending on clothing and footwear (23%) and recreation and culture (15.5%).
CHANGE IN RENTAL VACANCY RATES, ALL DWELLINGS, JULY 2023 Percentage points change
Sydney Melbourne Brisbane Adelaide Perth Hobart Darwin ACT Capital cities
Regional areas National
Vacancy rate
Monthly change
Quarterly change
Annual change
Annual change since March 2020
1.65% 1.41% 1.15% 0.96% 0.94% 1.75% 1.72% 2.12% 1.4% 1.51% 1.43%
-0.09 0 0.01 0.02 -0.09 -0.13 0.07 0.04 -0.03 -0.04 -0.04
0.03 0.03 -0.08 -0.03 -0.06 0.05 0.07 0.06 0.01 -0.08 -0.02
-0.37 -0.82 -0.35 0.08 -0.21 0.73 0.08 0.68 -0.4 0.22 -0.23
-52% -46% -51% -38% -63% 8%
-64% 100% -49% -36% -46% Source: PropTrack
CHANGE IN HOUSEHOLD SPENDING BY STATE/TERRITORY* May 2023
June 2023
July 2023
10% 5% 0
3.8% 2.7%
2.7% 0.8%
4.5% 4% 4.1% 3.9% 2.8% 2.5% 1.9% 1.7% 0.7% 0.5% 0.4%
0.8%
-1.4%
-0.7%
-2.2%
-0.9%
-5%
NSW
Vic
Qld
SA
1.7% 1%
-6.7%
*Current price, through the year change, calendar adjusted
-10%
4.2%
WA
Tas
NT
ACT
Source: ABS Monthly Housing Spending Indicator, July 2023
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5
UPFRONT
OPINION
GOT AN OPINION THAT COUNTS? Email antony.field@keymedia.com
Marking 30 years of broker advocacy For three decades the FBAA has been helping brokers tackle new challenges and shape their own destinies, says managing director Peter White
“LIFE IS not a puzzle to be solved. Life is a masterpiece that you create.” I recently read this quote as I was travelling back from the US in September after representing the FBAA at the International Mortgage Brokers Federation’s (IMBF’s) inaugural World Summit. I’d spent an intense day discussing several challenges – or ‘puzzles’ – with brokers from many different nations, before attending the national conference of our American counterpart, the National Association of Mortgage Brokers. It was a rewarding and valuable experience, and we all learnt a lot. I was thinking about the similarities between the challenges faced by Australian brokers and those faced by our international colleagues. There have been plenty in Australia over the years, and sometimes we spend a lot of time solving puzzles. These range from big-picture challenges like regulation changes, clawbacks and the behaviour and policies of lenders, to challenges for each broker, like marketing, time management and customer service. This year the FBAA celebrates its 30-year anniversary, and those brokers who started the fledgling organisation so many years ago were presented with what at the time seemed like insurmountable obstacles and endless puzzles to be solved in order to build something effective for the industry. Yes, those pioneers knew that developing an association by brokers for brokers, which would truly put brokers at the forefront – something that didn’t exist at the time – was theirs to create. Thirty years later, finance brokers across Australia are benefiting from that creation.
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We are masters of our own destiny. That’s not denying that there are outside factors that influence us and winds that blow us off course (who saw COVID coming?), but our ability to get back on track is directly proportional to the responsibility we take for our own actions. My challenge to our industry is to create your own masterpiece. For example, the establishment of the IMBF was intentional.
the need for change. Watch this space. Over many years our association has always looked to lead the way on issues that bring a better outcome for members, from professional development to renewing the industry, creating mental health initiatives and ensuring that we are the primary voice to help governments and senior ministers better understand our industry. But there is so much more to do, and we must do it together. Every broker can create their own masterpiece by being at the forefront of knowledge. Legislation and regulations will keep changing, and we must always be up to date, compliant and educated. Brokers should be looking at new technology like AI and asking how they can incorporate this into their marketing, business planning and customer relations. Embracing and understanding open banking to expedite back-end loan processing is a must for brokers to survive in the future. It ensures that we not only always act in the
Let’s take the keys of destiny and unlock our own doors. We can’t rely on others, and neither should we focus on the obstacles and puzzles before us The FBAA was the primary instigator of this relationship that we believe will be exceptionally valuable as the world becomes smaller. We are learning from other markets and presenting their lessons and trends directly to decision-makers across the government and industry in Australia. The FBAA believed that clawbacks were not an issue to be passive about, so we led the way with the objective to eliminate them. Yes, it’s a difficult puzzle to solve, and it will take time. Some may think elimination is too large a goal, but when you believe something is wrong, it’s important to push on. We’ve seen small steps that give us encouragement. Some lenders have made changes, and the government is not only talking to us but has given the FBAA an opportunity to present significant data that supports
best interests of our clients but also provide them with optimum service and assistance. This is what sets us apart as an industry. As we look to the future, let’s take the keys of destiny and unlock our own doors. We can’t rely on others, and neither should we focus on the obstacles and puzzles before us. Our industry leads the way by serving more than 70% of Australian borrowers. This happened not by accident but with intent. However, we must keep looking forward because there are still masterpieces to be created.
Peter White is managing director of the Finance Brokers Association of Australia. He has 45 years of industry experience across the banking, finance and broking sectors.
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PEOPLE
BIG INTERVIEW
SAM WHITE: TACKLING THE CLAWBACK CONTROVERSY Brokers have long complained about the clawing back of upfront commissions when customers refinance their home loans within two years. LMG executive chairman Sam White shares his thoughts with MPA
NOBODY LIKES to have their hard-earned money taken off them, so it’s no surprise brokers get upset over commission clawbacks. Sam White is a widely respected leader in the mortgage industry, and as the head of Australia and New Zealand’s largest aggregator, LMG, he has some firm views about clawback. “I know how painful clawbacks are for brokers, particularly at the current levels,” says White. “My view is that clawback is the downside of our commission structure and
cases clawbacks unfairly punish brokers for changes outside of their control. I know that brokers have done the work and don’t know for up to two years whether they will keep their pay or have to hand it back, and that it produces a lot of stress and anxiety. “These are all good reasons to fight for an abolition of clawback. However, I feel that if this were to happen, whilst some of these problems would be solved, other problems would be created and brokers would be worse off.” LMG brokers are also no fans of clawback;
“Clawback reform is essential. The model I advocate for resembles Bankwest’s, where clawback is spread over 18 months in even monthly instalments – I would like to see that reduced to 12 months” that brokers are better off with the current remuneration model, which incorporates clawback, than with the alternatives that would be canvassed if clawbacks were abolished. However, clawback policy desperately needs reform, and I’m pushing for that.” White realises that many brokers want clawback abolished. “I recognise that in many
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“all of us want to see less of them”, says White. “Many of our brokers want clawback abolished, and they make the assumption that if it gets abolished, nothing else would change,” he says. “When I point out that this may not be the case, I believe most understand that clawback reform is what we need rather than clawback abolition.”
Historically, LMG data shows that clawbacks have affected about 5–6% of brokers’ upfront revenue. White says that interestingly, in FY23 that figure surged to 11%, which he attributes directly to the cashback incentives that lenders introduced. “But as the cashback incentives wane, while I don’t have a crystal ball, I anticipate a reversion to the long-term level.” White says clawback reform is essential. “The model I advocate for resembles Bankwest’s, where clawback is spread over 18 months in even monthly instalments. I would like to see that period reduced to 12 months. “It’s challenging to convince lenders when clawback rates are at a current high of 11%; however, I believe they will be more receptive if clawback rates return to their longterm averages.” So, what does White think might happen if clawback was abolished? “If clawbacks disappear, everything goes back on the table,” he says. “I think the concern from lenders would be that the average life of a broker loan may reduce and that the economics of the channel would change.” White says this could impact brokers’ remuneration model. “It could potentially shrink brokers’ loan books, making them less valuable. Additionally, there’s a risk that
PROFILE Name: Sam White Title: Executive chairman Company: LMG Years in the industry: 29 Favourite quote: “Never waste a crisis” Career highlight: “Navigating the royal commission and its aftermath”
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BIG INTERVIEW lenders will not want to deal with brokers whose clients frequently refinance,” he says. “This means brokers could lose their accreditation due to no fault of theirs. Our proposal is to lobby lenders to reduce the clawback process to a 12-month period.” A number of banks have modified their clawback policies, but White says more change is required. “Some lenders have made changes, but they’re insufficient. Bankwest’s 18-month policy is a step in the right direction, offering a more balanced approach. But a 12-month straight-line amortisation would best serve
on insurance sales, and some charge clients direct fees.” White says the Dutch model, in which clients pay brokers directly and lenders don’t pay commissions to brokers, had no impact on rates after it was implemented. “Of course Australian brokers cannot charge their client a clawback fee as that is banned by legislation.” He says the head of the banking royal commission, Kenneth Hayne, recommended adopting the Dutch model. “However, the Dutch brokers I have met said that the interest rate clients paid the day before the change was the same they paid the day after – all that
“It’s crucial to have an upfront chat with clients about your remuneration model and the implications of clawbacks, and maintain open and proactive communication” brokers and lenders. The industry requires a clawback system that values the work brokers do for their clients, and we’ve been vocal on that.” White shares some tips for brokers on managing clawback, including the need to stay focused on creating value for their clients. “It’s crucial to have an upfront chat with clients about your remuneration model and the implications of clawbacks, and maintain open and proactive communication. “Staying in touch with clients post settlement is critical so that you retain the client if their circumstances change. And from an operational standpoint, setting aside about 5% of cash flow can help offset unpredicted clawbacks.” Looking at global models on broker remuneration and clawback, White says New Zealand is largely a fixed-rate market. “Their clawback spans 27 months, and brokers can charge clients a clawback fee, unlike here. “In the UK, there is no clawback, but the price is that brokers are paid 0.4% of the loan amount and no trail. Many UK brokers rely
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changed was the clients now paid a new broker or lender fee.” White believes Australia’s broker remuneration model is the best possible model that aligns a broker’s interest with their customer’s. “The model means Australian brokers don’t need to advise clients to move to a new lender to get paid. The downside of our model is clawback, and it is intertwined with other elements of our remuneration model – a model that works best for customers.” White says the Australia remuneration model works for customers, lenders and brokers. “We need clawback reform, not clawback abolition. The Bankwest model, where there is a straight-line amortisation over 18 months, is the fairest structure, although we would like to see lenders move to reduce that to 12 months.” He says the industry needs to collaborate on this and related issues to maintain a competitive landscape that benefits consumers. “I welcome conversations with our associations, brokers and lenders on this important issue.”
HOW LMG WANTS BROKER CHALLENGES ADDRESSED Net of offset calculations: Retain the model; abolish time limit for drawdown calculations. Lender cashbacks: Unsustainable for the industry. Time for change. Repricing vs refinancing: Clients should get a good chance with their current lender, but lenders should put their best offer forward, the first time. Referral programs: Paid referral programs should not be permitted by entities that do not operate under the best interests duty.
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SPECIAL REPORT
BROKERS ON NON-BANKS
2023
BROKERS ON NON-BANKS Brokers are placing more emphasis on non-banks’ product ranges and brand recognition, while their credit policies and interest rates are becoming less critical factors
MPA’S Brokers on Non-Banks 2023 survey reveals that the broker-lender relationship is evolving, evidenced by a shift in what brokers value most about the best non-bank mortgage lenders. The broking community rated non-banks’ performance across 10 metrics, elevating those with the highest scores to the winner’s podium. This year’s data suggests the medallists and runners-up have moved the yardstick forward on their overall competitiveness, which has strategically positioned them to climb back from declining market share and, as one broker said, “keep the big four on their toes”. Non-bank’ achievements are particularly impressive, given that a confluence of factors has made it a difficult market for them, says Chris Slater, AFG’s head of sales and distribution. “For many, their only distribution channel is the third party channel, so they are 100% committed to ensuring brokers have a wide and diverse range of products to better serve everyday Australians,” he explains. “In addition, their sales teams’ number one focus is trying to deliver a unique service proposition to stand out from the crowd. That competition is good for consumers.”
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Brokers consistently identify turnaround times as their top concern, and a majority observed improvements, including to the speed and efficiency of non-banks’ systems and processes: • “I have found the turnaround times often better than at the mainstream lenders” • “The non-banks have been holding to normal expectations; there have been some minor delays, but most of the time they are acceptable” In a dramatic turnaround, there was a three-way tie for second place between product range, brand recognition, and communications, training and development. This highlights that there is work to be done by nonbanks to boost brokers’ confidence in the promotion of their products. This trend is unsurprising to Peter White, managing director at the FBAA. “We have a lot to thank our pioneers in this field for, but as competition increases, so does the need to nurture those who want to bring you business,” he says. “Plus, new brokers who do or
will not know what you are offering are constantly entering the marketplace.” Brokers’ heightened focus on non-banks’ product range emphasises that they believe more lending options are needed for clients who can’t meet the criteria for prime lending. This year, there has also been a rise in the desire for product diversification opportunities, which now ranks sixth on the priority list. Perhaps that’s what prompted brokers this year to weigh in on the lending products they deemed the best. The winners are below, with some positive broker feedback: • Liberty’s Star Products: “offers competitive interest rates with great turnaround” • Pepper Money’s Low Doc: “generally a better interest rate” • Firstmac’s SMSF: “offers a significantly reduced interest rate” Another significant takeaway was the increased importance of non-bank brand recognition, highlighting the value brokers place on the reputation and visibility of the lenders they choose to do business with.
A reversal in commission structure also surfaced, falling to ninth place this year from the second-place concern in 2022. Interest rates also saw a decrease in importance, moving to eighth place from fifth in 2022. This clearly signals that they are becoming less of a primary concern for brokers. “Major banks are about rates, non-banks are solutions-based; these are two different beasts,” a respondent commented. Still, many brokers noted that non-banks could further boost their competitiveness through “lower rates and fees”. Non-banks’ BDM support dropped three points to seventh place, and brokers downgraded the importance of credit policy to last place from ninth in 2022. Online platforms and services held steady in fifth place, with brokers ranking its importance slightly higher than last year.
METHODOLOGY In this year’s survey, brokers were asked to rank non-bank lenders across 10 categories: BDM support; brand recognition; commission structure; communications, training and development; credit policy; interest rates; online platform and services; product diversification opportunities; product range; and turnaround times. Brokers could rank the non-banks with a score out of five in each category. Only those institutions that achieved a response rate of at least 10% of brokers for each non-bank were included in the final list. The survey also recorded broker responses on their preferred non-banks in these areas: specialist lending; first home buyers; property investors; commercial; alt doc; SMSF; and foreign non-residents. MPA asked the brokers a series of questions relating to their business with non-bank lenders, as well as which non-bank they would like to see added to their aggregator’s panel, but these did not influence the overall score.
TYPICAL RESPONDENT
Gender Male
75%
Female
25%
Writes $20m–$40m worth of mortgages a year
Has been in the industry for more than 15 years
Is most likely to live in NSW or Vic
Years as a broker 18%
20%
30%
32%
2 or less
3 to 5
6 to 15
Over 15
What do brokers want from non-banks? RANKING
AVG RATING
Turnaround times
1
4.204
Communications, training and development
2
4.158
Product range
2
4.158
Brand recognition
2
4.158
Online platform and services
5
4.128
Product diversification opportunities
6
4.117
BDM support
7
4.112
Interest rates
8
4.107
Commission structure
9
4.056
Product range
10
4.000
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SPECIAL REPORT
BROKERS ON NON-BANKS
WHY USE A NON-BANK? While the proportion of brokers’ loans put through non-banks continues to decrease, their appreciation of personalised service and a supportive lending experience is on the rise MPA’S SURVEY showed a marked decline over the past three years in the proportion of brokers who are increasing the number of loans put through non-banks: from 69% in 2021 to 63% in 2022 and just 50% in 2023. The percentage of those putting the lowest proportion of loans (20% or less) through a non-bank was 60% versus 44% in 2022. At the high end, just 8% of brokers put more than 60% of their loans through nonbanks this year, down significantly from 13% last year and 12% in 2021. In recent times, non-banks’ share has been declining, notes Specialist Finance Group (SFG) general manager Blake Buchanan. “This is for various reasons, including consumer comfort with the majors during troubling times; service propositions and more,” he adds. “Non-banks usually follow technology and process trends that the banks tend to set the standards for, but this often puts them in second position and at considerable risk of further losing market share, which will lead to more mergers and acquisitions with less competition.” The expected proportion of loans forecast to go through non-banks in 2024 is relatively consistent with last year’s estimates, suggesting that market conditions and the competitive mortgage landscape may influence brokers’ predictions. FBAA managing director Peter White points out that, where appropriate, aggregators need to ensure a fair and balanced approach so that all non-banks are heard and utilised. “There is a deep history here, which is largely what brought competition into our lending sphere, but the non-banks need to
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step up as well and make sure the broker community’s needs beyond freebies, feed and watering are also being met,” he adds. Non-banks remain strong for individuals with fluctuating incomes, the self-employed and investors looking for yield, and they have maintained lending standards and effectively managed risk while serving diverse clients. In addition, loss rates for non-bank mortgages have been low in recent years, according to a March 2023 Reserve Bank of Australia bulletin. There was no shortage of broker commentary on whether non-banks have provided enough competition for mainstream lenders in the past year:
• “There are a lot of business owners and outside-the-box-borrowers who were being denied by the main banks, which the non-bank lenders have taken on, and their ability to take on more risk makes the environment competitive” • “Non-banks offer a great alternative for people who have experienced life events about which the main banks turn away” • “Non-banks have always provided competition, but they still operate in the same niche and, when many homeowners could come under stress, now would be a great time to pick up market share”
HAVE YOU SENT MORE LOANS TO NON-BANKS IN THE LAST 12 MONTHS THAN IN THE PREVIOUS YEAR?
2023
2022
Yes – 50% No – 50%
Yes – 63% No – 37%
The second, third and fourth most popular reasons brokers would use a non-bank remain the same this year as last:
TOP 5 REASONS YOU WOULD PICK A NON-BANK LENDER OVER A BANK Takes a wider view than customer’s credit score
• banks have tightened their credit policies • the client lacks standard documentation such as payslips • regulatory changes have prevented the client from going to a mainstream bank
28.57% Banks have tightened their credit policy
22.96%
Although easing off slightly in importance, a lack of standard documentation remains a primary factor driving clients to non-bank lenders, particularly borrowers with diverse financial backgrounds. One broker commented that some nonbanks’ near prime products “allow lending to clients with credit impairment”. More personal service has replaced competitive rates at the bottom of the top five. This factor appears to be tied into the top reason for brokers choosing to work with a non-bank lender, which is that a wider view of the client’s credit score is considered. Brokers appear to find value in a supportive lending experience that is nuanced and solutions based.
The client lacks standard documentation (ie payslips)
14.80% Regulatory changes have prevented client from going to the bank (ie investors)
9.69% More personalised service
6.12%
BROKER LOAN FLOWS TO NON-BANKS: ACTUAL VS FORECAST 2024 forecast
60
2023 actual
2023 forecast
59.69% 50 40
46.94%
30
34.0%
20
32.65%
29.0% 23.47%
10 0
22.0% 11.73%
0–20
21–40
9.18%
41–60
11.0% 6.12%
4.08%
61–80
2.55%
3.57%
5.0%
81–100
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SPECIAL REPORT
BROKERS ON NON-BANKS
COMPETITIVE FORCES AT PLAY IN NON-BANK SECTOR A high proportion of borrowers continue to see non-banks favourably, though this figure is declining, and a lack of brand awareness remains a concern BROKERS’ RATINGS of the benefits of using non-banks in 2023 showcase the increasing competitiveness of the specialist lending landscape. Although there is a clear overall winner, the small differences between the gold, silver and bronze winners suggest the top performers are competing earnestly. The top three non-banks overall won six golds, five silvers and four bronzes across all categories except for product range. That distinction went to the eighth-place winner overall, Better Choice Home Loans. Pepper Money won gold for the sixth year for its BDM support, Liberty also took gold in four categories, including turnaround times and interest rates, and Bluestone garnered the same for communications, training and development. Non-banks in the middle of the rankings with gold wins included Prospa for commission structure and product diversification
ARE CLIENTS TYPICALLY OPEN TO CONSIDERING NON-BANK PRODUCTS?
2023
2022
Yes – 82% No – 18%
Yes – 89% No – 11%
WHAT IS THE MAIN BARRIER TO PUTTING MORE BUSINESS THROUGH NON-BANK LENDERS?
16
69.90%
11.22%
4.08%
3.57%
3.57%
3.57%
4.09%
Higher rates/fees
Lack of brand awareness
Customers want a branch network
Poor service
Poor turnaround times
They are not on my aggregator’s panel
Other
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SPECIAL REPORT
BROKERS ON NON-BANKS opportunities, and Better Mortgage Management for brand recognition. This year, the golds determined the champion, and Liberty was crowned first place overall with a score of 3.90 out of 5. This result, and other top lenders’ final tallies, topped last year’s by a significant margin, indicating industrywide improvements that brokers lauded. Liberty was also the lender that brokers most wanted to see added to their aggregator panel this year. Mortgage Ezy made a comeback, securing second choice, and Better Mortgage Management claimed third. While interest rates took a dive in terms of importance to brokers when dealing with non-banks, high rates and fees are consistently cited by a majority of brokers as the number one barrier to putting more business through non-banks. This persistent trend underscores the complex and evolving nature of the lending industry and just how acutely aware brokers are of the impact interest rates have on loan origination. It also suggests that a high interest rate environment will limit non-banks’ market share, but they have been adapting to compete effectively by offering bespoke loan products, competitive rates and flexible lending policies. “Challenger lenders should be groundbreaking in the fulfilment space and investing more and sooner into open banking, payroll accesses and direct digital connectivity to broker CRMs for credit decisioning responses in real time,” says Blake Buchanan at broker aggregator SFG. Still, 70% of brokers expressed concerns: • “It is difficult to place a loan with a non-bank lender when their rate is higher than a traditional lender; the service is better, but how can you justify the higher expense?” • “They could be more competitive with rates, which they could offset with a slightly higher one-off fee” • “Reasonable rates would attract and retain better-quality customers”
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HIGHLIGHTS: BENEFITS OF USING A NON-BANK BDM support
Pepper Money
Liberty
La Trobe Financial
Liberty
ORDE Financial
Pepper Money
Firstmac
Commission structure
Prospa
Credit policy
Liberty
But not all share that view, commenting that certain lenders’ products offer: • “great interest rates ... no fees attached” • “flexibility regarding income acceptance and a common-sense approach to clients and their ability to service the loan”
AFG’s Chris Slater emphasises that major banks continue to exert significant influence over the sector and have increased their market power and concentration. “The irony is that the dominance of major lenders has been aided in part by regulatory moves to strengthen the nation’s financial system, and the flow-on consequences have
HIGHLIGHTS: PRODUCTS AND BRANDING Interest rates
Liberty
Better Mortgage Management
Bluestone
Better Choice Home Loans
Liberty
Brand recognition
Better Mortgage Management Product range
Better Choice Home Loans
Firstmac
Mortgage Ezy
Product diversification opportunities
Prospa
Liberty
Bluestone
meant a material advantage for the big players that helps reinforce the lower capital and funding cost structure they conventionally enjoy through their size and scale,” he says. “The situation is compounded by the current environment of high inflation and volatile markets, which has meant that the RMBS market, which smaller lenders often rely on as a source of competitive funding, has not been an option for many this year. This lack of competition and favoured status of the major banks is the reason that AFG has been lobbying for a supplement to the private RMBS market with a publicly supported RMBS scheme.” The second barrier to using non-banks was a lack of brand awareness, but it appears they have steadily upped their visibility in recent years, judging by the number of respondents who noted it as a barrier: 11% in 2023, compared to 20% in 2022 and 27% in 2021. The proportion of brokers who said their clients were typically open to considering non-bank products continued to decline over the past three years, but remains high at 82%, compared to 90% in 2021. Comments highlighted clients’ confidence in non-banks: • “They met my client’s needs in a difficult situation” • “Non-banks have improved their pricing and credit structure and have engaged knowledgeable staff who have the expertise in assisting brokers with their business” Better Mortgage Management won the gold for brand recognition, a testament to its efforts to build a strong reputation that brokers perceive to be at the leading edge. The survey’s overall results show that brokers are prioritising brand recognition to help boost the credibility of non-banks with clients. A small group of respondents identified lack of brand awareness as a barrier to putting more business through non-banks. One broker observed that it is “huge in the current market”.
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SPECIAL REPORT
BROKERS ON NON-BANKS
TECHNOLOGY, TURNAROUND AND SERVICE A majority of brokers reported improved turnaround times, but their wish list has changed this year to prioritise a simpler income verification process to boost customer experience A SIGNIFICANTLY higher proportion of brokers this year – 83% compared to 73% in 2022 – said turnaround times had improved or remained the same. Less than a quarter felt that times had worsened, suggesting that while non-banks have made gains in this area, there is room for further improvement. Brokers felt that staffing levels and communication were better and processes more streamlined, resulting in faster and more efficient service: • “The digitisation of many parts of the process has sped up processing times” • “Most turnaround times were quite shocking last year with all of the non-bank lenders at times, so it’s good to see it consistently be somewhat good this year” • “The key is forming a strong relationship with each non-bank BDM because they seem more accessible and helpful” For the small group of respondents who felt times had worsened, the reasons offered included: • “Slower processing due to higher business volumes” • “Certain non-bank lenders taking much longer to complete assessments” Liberty, which won gold in this category, was acknowledged by brokers as “quick”, with
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turnaround times that are “great compared to the major lenders”. La Trobe Financial was once again the source of broker frustration for its perceived slowness. However, its strengths in other areas were recognised: brokers named La Trobe Financial as their preferred lender in the commercial and foreign non-residents categories, and it won the bronze medal for its BDM support.
It appears that brokers’ experience with turnaround times can vary widely: • “Lodged in the morning and approved in the afternoon, couldn’t ask for more” • “Better systems are in place with regular updates on where a deal is sitting throughout the whole process from start to finish”
HOW HAVE TURNAROUND TIMES AND COMMISSION STRUCTURES CHANGED OVER THE PAST YEAR? Turnaround times 7.65%
Commission structures Improved significantly
5.10% 10.71%
33.16%
Improved
79.59% 42.35%
No difference
16.84%
Worsened
4.59%
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Alternative income verification option available (e.g. accountant declaration, business activity statement or a business bank statement)
Cashflow enhancing solutions such as commercial loans with 30-year loan terms
We understand the challenges of being self-employed, so our customers have free access to a variety of services via our RedZed Benefits program
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T 1300 722 462
info@redzed.com
F 1300 722 097
GPO Box 1693, Melbourne 3001
SPECIAL REPORT
BROKERS ON NON-BANKS • “Turnaround depends on the complexity of the deal” • “Turnaround times, most of the time, are not relevant because we go to non-bank lenders if clients do not fit bank credit policy” Brokers suggestions for how non-banks could improve their service levels are in line with last year’s results. But a significantly increased number, or more than a quarter of respondents, want a simpler income verification process. High on brokers’ wish list are also more and better-trained BDMs and credit assessors. Brokers’ feedback included: • “There are too many obstacles to overcome throughout the process, such as document collation, credit assessment, quality and compliance department involvement” • “Requirements are still close to what traditional banks require, and credit managers don’t have discretion to approve outside of policy, regardless of quality of deal” • “Better availability with BDMs, and ensuring the scenarios provided up front are supported through to approval” Better technology was cited as important by a slightly higher number of brokers this year, indicating their awareness of how critical it is to the broker and client experience, and to giving non-banks a competitive edge.
HIGHLIGHTS: TURNAROUND, TECH, COMMUNICATION Turnaround times
Liberty
ORDE Financial
RedZed
Communications, training and development
Bluestone
Liberty
Pepper Money
Thinktank
Better Choice Home Loans
Online platform and services
Liberty
HOW COULD NON-BANKS IMPROVE THEIR SERVICE LEVELS?
22
27.55%
23.98%
14.29%
12.24%
5.10%
15.31%
Simpler income verification process
Better technology
Better-trained BDMs/credit assessors
More BDMs/credit assessors
Better communication
Other
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SPECIAL REPORT
BROKERS ON NON-BANKS
WHAT YOU’RE SAYING There were two chances to win a bottle of liquor by answering the question, “Do you think the non-banks have provided enough competition to the banks over the last year? Why/why not?” Winning ‘Thirsty Thursday’ comment for a bottle of Don Julio Blanco tequila:
“Yes, they have. The major banks will always chase the ‘vanilla’ deals, but fewer people fit this mould. Being able to provide clients with solutions that allow for a real person to consider real-life issues is very helpful indeed.”
Close but no cigar: “I would recommend non-bank lenders far more if the rates were more competitive. The service levels and turnaround times are all great; however, it’s hard to recommend a loan at 8% when loans exist with rates up to and beyond a full percentage point lower.”
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Winning ‘Tequila Tuesday’ comment for a bottle of Don Julio Reposado tequila:
“Yes and no. They offer plenty of product options and solutions for clients, but interest rates are still challenging to service.”
Close but no cigar: “Yes, and they seem to be getting better, too. Banks are somewhat restricted by policy, and non-banks can fill niches.”
FINAL RESULTS Liberty emerged as overall champion of the 2023 Brokers on Non-Banks survey with a significant haul of gold and silver medals across the board “WE ARE thrilled our business partners have chosen Liberty as their preferred nonbank lender for the second year running,” says Liberty CEO James Boyle. “This recognition is a testament to the commitment of the entire Liberty team, from our BDMs to our underwriters and support staff.” Boyle says surveys such as Brokers on Non-Banks help Liberty understand how it
can best serve brokers and clients in any economic environment. “They help us ensure we continue to improve and create positive experiences for brokers and customers alike, even under challenging conditions,” he says. “As well as a reliable and fast response, customers want competitive terms and the flexibility to help them move forward. “By adopting a free-thinking approach and
BROKERS’ PREFERRED LENDERS BY CATEGORY
First home buyers
Liberty
Alt-doc
Liberty
SMSF
Liberty
Property investors
Liberty
Commercial
La Trobe Financial
Foreign non-residents
providing out-of-the-box credit solutions we can help a wide range of customers with exceptional lending options. Liberty continues to lead the industry with unmatched diversification and capital strength.” Boyle says brokers have been central to Liberty’s business since day one, and “we will continue to build strong relationships and meet the needs of our broker partners”.
FINAL RESULTS Non-bank
Overall score
1st
Liberty
3.90
2nd
Pepper Money
3.69
3rd
Bluestone
3.63
4th
RedZed
3.54
5th
Mortgage Ezy
3.46
6th
Prospa
3.45
=7th
Thinktank
3.41
=7th
Better Choice Home Loans
3.41
8th
Better Mortgage Management
3.40
=9th
ORDE Financial
3.37
=9th
Firstmac
3.37
10th
La Trobe Financial
3.30
La Trobe Financial
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25
SPECIAL REPORT
BROKERS ON NON-BANKS OVERALL RANKING: RUNNERS-UP COMMENTS
PEPPER MONEY
2nd
BLUESTONE
3rd
Pepper Money is a persistent gold medal winner for BDM support. What factors underpin your excellence in this category? Barry Saoud, general manager, mortgages and commercial lending: As customer
Bluestone won gold in the communications, training and development category. What are the driving forces behind your success in this area? Tony MacRae, chief sales officer: We’re proud to have won gold in the communications, training and development category for the second year in a row. Our success comes down to our implementation of simple yet effective processes.
scenarios are becoming more complex, Pepper Money continues to be at the forefront of supporting our brokers with troubleshooting complex scenarios with speed and confidence. Pepper Money BDMs are actively workshopping applications with brokers even when it might look like a no on the surface. They are willing to invest time and effort in exploring alternative approaches, asking: “If we can’t do it this way, can we do it that way?” It’s this can-do attitude that Pepper Money’s BDMs are celebrated for. They go above and beyond to ensure brokers are supported.
Earlier this year, we launched the Scenario Hotline – brokers can call 13 BLUE and speak directly to a senior underwriter to workshop pre-submission deals, ask policy questions, or get help with application submissions. Education is at the heart of the support we provide to brokers so that they can leverage our experience to diversify their businesses.
How do you intend to leverage your current success moving forward? BS: We are humbled and delighted that brokers consistently choose Pepper Money. We cannot thank them enough for their continued support, ongoing feedback, recognition, and confidence that we deliver the right products, services and support to meet brokers’ and customers’ needs. Keeping our finger on the pulse is crucial to continually improving our offering and providing tangible value to brokers and their customers. Across the business, we practise ideation and open dialogue with our extensive network of aggregators, white label partners, brokers and customers to help us understand the challenges being felt in the market. Starting here allows us to ensure our lending options meet the unique needs of brokers and their customers, filling the gaps where other lenders fall short. For over 23 years, brokers have assisted us in building Pepper Money, and we will continue to lean on our broker network for future success.
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How do you intend to leverage your current success moving forward? TM: We are thrilled to receive industry recognition. At the same time, we know there is much more work to do. We have a clear focus on helping brokers serve more customers and grow their businesses; communications and training are a vital part of that. We strive to be the ‘go-to’ lender for brokers for non-standard mortgages. We have recently expanded our credit policy to ensure we give brokers greater choice in helping customers. We have grown the team to ensure we can provide greater support to brokers on the ground.
REDZED Re
4th
RedZed won bronze for turnaround times. What are your strengths in this area? Loralle Slater, chief sales and marketing officer: At RedZed, we are committed to supporting and empowering our self-employed customers, and we ensure they remain at the heart of everything we do. To this end, we have invested significantly in technology, allowing our team to achieve consistently fast turnaround times and deliver exceptional customer experiences to our borrowers and broker partners. We understand that brokers and our customers are busy people, so we strive to make accessing finance simple, fast and stress-free. We adopt a holistic view of business and income and take a common-sense approach to the loan application process. We also give our broker partners direct access to our BDM and client services teams and our credit assessors. How do you intend to leverage your current success moving forward? LS: A clear and simple strategy, together with a focus on ongoing improvement and innovation, is central to achieving success, so we will continue to invest in technology to assist RedZed staff with finding the right solutions for their brokers and customers promptly, while ensuring that a human is still involved in every loan decision. We will also continue enhancing our product and service offerings to ensure we deliver outstanding customer experiences for brokers and borrowers.
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FEATURES
MAJOR BANKS ROUNDTABLE 2023
WORKING TOGETHER TO HELP CUSTOMERS Major banks have been busy ramping up their support for brokers and their customers in a time of rapid change over the past 12 months. Brokers joined the heads of third party partnerships at the major banks for MPA’s annual roundtable to discuss key issues affecting the industry
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COMMUNICATION, RESILIENCE and an ability to adapt to a changing market and the needs of broker partners are the key themes that emerged from MPA’s 2023 Major Banks Roundtable. It’s been a number of years since banks, brokers and homeowners have faced such a challenging economic period, with the Reserve Bank of Australia lifting the official cash rate 12 times in little over a year. On top of higher interest rates, when you throw into the mix rising inflation, labour shortages, supply chain issues and a flat property market, it’s no surprise that some mortgage holders are feeling a bit anxious about what the future holds. There has also been intense competition among banks to acquire new home loan customers in a slower market, and to hold on to existing clients. Brokers have been inundated with refinance requests, often driven by attractive cashback offers. But inflation has since eased; it’s looking likely that the RBA is nearing the end of its rate-hiking cycle; and while mortgage holders are increasingly feeling the pinch, they’re proving resilient, and most are still in good shape. The property market is also on the rise as spring selling season gets underway. Banks have either reduced cashbacks or got rid of them altogether. They have also adjusted their clawback policies to provide a fairer system for brokers when it comes to commissions. The changing market and the so-called ‘mortgage cliff ’; increased communication with brokers and customers; the reduction in cashback offers; clawbacks, and technology were all topics up for discussion at this year’s Major Banks Roundtable, held at Silks restaurant at the Crown Sydney.
www.mpamag.com/au
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FEATURES
MAJOR BANKS ROUNDTABLE 2023 THE PANELLISTS BROKERS
Wendy Brown Head of broker sales, Macquarie Banking and Financial Services Group
Roundtable participants included Paul Brick, head of strategic partnerships, ANZ; Adam Brown, executive, broker distribution, NAB; Wendy Brown, head of broker sales, Macquarie Bank; Razia Khan, general manager third party banking, CommBank; and Sarah Willsallen, state general manager NSW/ACT – mortgage broker distribution, Westpac Group. Representing brokers were Desiree Dietrich, director, The Financial District, and James Russell, director, Kelly+Partners Finance.
In the last 12 months, Australia has experienced the most rapid interest rate rises in decades. How have major banks responded and adjusted to this challenge and supported brokers and their customers? What does your data show about levels of mortgage stress among customers? Wendy Brown of Macquarie Bank started the discussion, saying that Macquarie Bank had been in a positive position, given that it had a lower-LVR loan book compared to the broader industry. “So that’s set our customers up for success,” she said. “And also, in combination with having the lowest debt-to-income for quite some time, we haven’t seen any material impact on our book. “We’ve seen an increase in phone calls, but actually not an increase in home loan stress.
Razia Khan General manager third party banking, CommBank
Sarah Willsallen NSW/ACT state general manager, Westpac Group
We’re really seeing a trend of our customers coming to us early and having great conversations, or their brokers are encouraging them to come to us early.” Brown said customers were asking about their options, more so than asking for help. They also had high levels of savings, and unemployment was low. Sarah Willsallen said it was a similar situation at Westpac Bank. “Default and delinquencies actually remain low, the economy is still relatively strong, and unemployment is low,” she said. “We absolutely recognise that there’d be customers impacted by cost of living increases, and it’s a big concern for them.” Westpac encourages any customers who are concerned about their financial situations to reach out, Willsallen said. “There are so many options – all of the lenders have amazing assist teams that are there to help; there’s so many things that we’re able to do. The earlier customers and their brokers engage with us, the more
Desiree Dietrich Director, The Financial District
James Russell Director, Kelly+Partners Finance
options we’ve got and the more we can support them.” Willsallen said that while Westpac had not seen big increases in hardship cases, it was something the bank was keeping a close eye on because it was potentially a difficult period for some people. In terms of communicating with brokers, she said the main message was that they should work with the bank earlier to help support customers. “As part of the fixed rate roll-off, we’ve been really proactive in making sure that customers rolling off are getting competitive pricing and good outcomes without needing to jump through hoops or do lots of extra steps. I think that proactivity and trying to help ease the transition is really important.” Willsallen said customers should be aware of when they will be rolling off their fixed rates and how to plan for that. Westpac offers calculators and other tools to help them budget. “But equally, the biggest thing
ASSET QUALITY OF MAJOR BANKS: HALF-YEAR 2023 RESULTS ASSET
Adam Brown Executive, broker distribution, NAB
QUALITY
Paul Brick Head of strategic partnerships, ANZ
Average credit impairment provisions (as % of GLA) decreased by 2.6 bps to
0.67%
Total impaired loans decreased by 13% to
$6.6bn Source: KPMG Major Australian Banks Half Year 2023 report – May 2023
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FEATURES
MAJOR BANKS ROUNDTABLE 2023
“As part of the fixed rate roll-off, we’ve been really proactive in making sure that customers are getting competitive pricing and good outcomes without needing to jump through hoops” Sarah Willsallen, Westpac is the role brokers are able to play in helping coach, support and guide their customer and make sure those conversations happen, transparently and really early.” Adam Brown said NAB had proactively reached out to more than half a million customers since May 2022 to discuss their financial wellbeing. “In the first quarter this year [we reached out to] about 10,000 home loan customers, and what we found is where we’ve engaged early, 90% of customers are back on their feet and in a better situation within 90 days.” Brown said around 50% of NAB home loan customers were due to roll off low fixed rates on to variable rates soon, and the
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bank had been keeping a close eye on these customers and reaching out to those who might need extra support. “While interest rates have gone up, there’s a large cohort that haven’t had significant impacts yet,” he said. “We’re [working] proactively with customers on fixed rate rollovers, interest-only rollovers – and helping them understand what they’re about to head into is an opportunity to provide significant support.” Echoing Willsallen’s comments, Razia Khan said CommBank was also seeing similarly low delinquency rates. “We went out and really looked at our hardship solutions in particular to make sure that we had a broader suite,” she said.
“We’ve introduced more solutions, ensuring that brokers and their customers are reaching out to our hardship team to discuss different options.” Khan said more than a third of CommBank customers were more than two years ahead on their mortgage repayments, with 78% having made repayments in advance. Broker James Russell from Kelly+Partners Finance asked how quickly banks had seen savings balances drop and whether it was something they tracked quarter-on-quarter. Paul Brick from ANZ said the bank’s retail book was higher than it was pre-COVID. “Many home loan customers at ANZ are ahead in their repayments. Since the start of the pandemic, they’ve built up their savings and have increased the equity in their homes as well.” Many fixed rate customers had already rolled off their rates at ANZ, Brick said. “The important thing to note is that all those customers were assessed with a buffer. Many have now gone off their fixed rate, and there’s been no material change to delinquency levels.” Brick said it showed that Australians were managing their mortgages proactively.
“That said, there will be some that may be concerned about their repayments, and all the major banks have programs to help those customers – early engagement is clearly the key.” Wendy Brown said there were many options for customers now, such as deferrals or reduced payments, adding that major banks now provided a tailored, personalised approach to customers in financial difficulty.
to act quickly to help customers, who were often worried about losing their jobs. “We didn’t have time to design the perfection solution; we had to work it out on the fly – but that put us in good stead to face the next major challenge [higher interest rates].” Russell said clients were now more proactive in selling their properties before they got to the point of no return. “Back in the day they would have held on for as long as they could;
“Some of the banks have better digital access to viewing loan information online than others. With some of them you’re flying blind unless you call the bank” James Russell, Kelly+Partners Finance She said borrowers had been vocal about picking up the phone early and contacting the bank if they encountered problems. Unlike earlier times when telling the bank you were behind on your repayments was a social taboo, she said a great cultural change had occurred when it came to customers opening up to their brokers and the bank. Adam Brown said banks had undergone a “trial run” during COVID, when they had
now they’re saying, ‘we can’t afford this; let’s sell it and downsize or sell and rent for a while’, which I’ve had a few customers do.” Desiree Dietrich, of brokerage The Financial District, said some clients had told her that instead of letting their mortgages suffer, they would cut back on spending in other areas – for example, by sending their children to public schools instead of private schools. “They’re changing the way they live their
lives,” Dietrich said. “Quite a few of them are selling investments. When interest rates were very low, they bought two or three investment properties, but now they are having to chip in with their own money, and it’s too stressful. So they’re selling one or two.”
Thousands of homeowners are set to come off low fixed rates and face much higher mortgage repayments in the coming months. What steps have you put in place to ensure brokers and customers are prepared and can handle this big change? Brick said ANZ has a process of contacting customers, whether broker-introduced or proprietary, alerting them that they’re coming off their fixed rates, projecting what their payments might look like in the future and helping them to prepare. “We talked about early engagement before from customer to bank; the early engagement from bank to customer was really useful as well,” he said. ANZ also offers a range of resources directly to brokers and their customers, such as a financial wellbeing program. At NAB, Adam Brown said the bank reaches out to fixed rate customers at 90, 45 and 30 days before their terms end, but
RBA CASH RATE TARGET, 1990–2023 %
%
20
20
15
15
10
10
5
5
0
0 1990
1995
2000
2005
2010
2015
2020 Source: Reserve Bank of Australia
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“our call to action is for customers to contact their broker”. “The brokers also receive SMS messages from us to let them know we are engaging with our customers. We recognise that brokers have a key role to play here – they introduced us to that customer. It’s also an opportunity for them to help support that customer and maintain that contact, and suits the relationship they have.” Brown said NAB was retaining about 85% of customers who rolled off a fixed rate, and he believed it had a lot to do with early engagement with both the broker and the customer. “If they know what they’re heading into and you’re able to help before they get to the roll-off, they’re much more comfortable with what the options are.” Russell asked Adam Brown if NAB customers were rolling off onto variable rates or fixed. Brown said that earlier on it was fixed, but it had quickly moved to variable rates now because fixed rates had risen above variable rates. Khan said that in her previous role at CommBank, she led the fixed rate customer retention strategy. “We’re aiming to contact all of our fixed rate customers at 90- and 45-days pre-expiry
and post roll-off,” she said. “We’re ensuring that we’re communicating with our brokers to let them know that we are having these conversations with our customers.” Communications have also been sent out to customers, encouraging them to contact the bank. “We also aim to add value back to customers through ‘Yello’ – our CommBank Rewards program which offers customers discounts and cashback on their everyday spend for things such as groceries, fuel and food delivery at some of Australia’s most loved brands,” Khan said. “As of July, CommBank customers had saved $30 million through our CommBank Rewards cashback program.” Willsallen said the biggest thing Westpac had done was to ensure the roll-off rate provided a good, competitive discount up front without the customer needing to act. Dietrich praised Westpac’s approach and said a Westpac representative rang her each month to say, “your clients are coming off their fixed and we’re offering them this”. She said the discount they were offering was unbeatable. “And they allow us to phone up the clients and say, ‘we got it for you’. This is making the broker look good.” Willsallen said Westpac wanted to
preserve the role the broker plays in engaging with the customer, and in that transition, as the rate cycle changes. Russell said it was good for banks to keep brokers up to date on what’s happening with clients. “Some of the banks have better digital access to viewing that loan information online than others,” he explained. “With some of them you’re flying blind unless you call the bank. If the customer fixed over the phone directly to the bank, I’ve got no record that ever happened unless someone tells me.” Wendy Brown said Macquarie Bank is able to quickly add information into the broker portal so brokers can see not only the current fixed rate but also the expiry date. This is helpful for brokers who have brought in customers on a variable rate but have no visibility if a customer has called the bank and moved to a fixed rate. “We also have the ability for a rate request to go straight from the broker immediately, and that’s been very successful as well,” she said. “Brokers get credit for being able to proactively ring a customer when their rate expires – it helps your brand and your relationships, as well having accurate data. The feedback has been fantastic.”
REFINANCING TREND, YEAR TO SEPT 2023 Refinancing volume index, Oct 2022–Sept 2023
Latest refinance volume index
280
199.4
260 240
Index
220
% change WEEK
+2.2
% change MONTH
-9.3
% change QUARTER
-16.2
% change YEAR
+20.3
200 180 160 140 120 100 80
Oct 22
Nov 22
Dec 22
Jan 23
Feb 23 Mar 23
Apr 23 May 23
Jun 23
Jul 23
Aug 23
Sep 23
Source: PEXA Refinance Index
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Dietrich said this feature, also offered by CommBank, was really helpful.
The home loan market is highly competitive as lenders chase refinance opportunities. A number of banks have dropped cashback offers, which has been welcomed by brokers. What are your thoughts about cashbacks, and how do you balance the needs of existing customers with the need to acquire new customers? Brick said it was important to “have as dynamic an industry as we possibly can” that offers a range of options. “That’s where brokers can actually recommend a differentiated product set to their customers. The important thing is that there is competition in the industry, and the different product and pricing mixes are going to suit different customers.” He said this was where the broker “really came into their own” in making recommendations to customers. “Customers and brokers do like aspects of the cashback offering,” Brick said. “It will suit different people at different times, but I think as a guiding principle, competition, diversity and options are important.”
“The significance of creating long-term relationships with customers is at the heart of what we’re doing, particularly when it’s been a refinancing market” Adam Brown, NAB ANZ also has a $3,000 offer for first home buyers as the bank looks to balance refinances with purchases, and support those seeking to enter the market. Brick said ANZ constantly monitors the market to ensure that its home loan products, policies, features, benefits and services remain competitive. Willsallen said mortgage competition was intensely fierce, with a lot of lenders competing actively for a small pool of lending. “The winners are the customers,” she said. “It keeps us all focused on delivering a great offering – a mix of price and proposition and service.” This was the role brokers played – by making sure they could guide customers through different choices of lenders across the market. Willsallen said this had helped
brokers grow to achieve the market share they enjoy today. “For us, we always be active in supporting a competitive market and making sure that we do everything we can to get a good share of new customers but also to retain the ones we have,” she said. Khan said CommBank had removed cashbacks on 1 June, and while refinancing activity had softened, the key reason for no longer offering cashbacks centred on being able to create longer-term relationships with customers. “We know refinance activity is hot in the market. We’ve introduced a ‘Yello’ customer recognition program to all of our eligible home loan customers – we’re trying to give our customers more back, and hopefully that creates a longer-term relationship with CBA.”
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Adam Brown said NAB had also recently removed cashback offers, which it had done previously in 2020. “It depends on the market at the time and what customers are looking for,” he said. “The significance of creating long-term relationships with customers is at the heart of what we’re doing, particularly when it’s been a high-refinancing market.” NAB wants to help support existing customers coming off fixed rates and interestonly terms, and the idea is to achieve a better balance between acquisition and retention by removing cashbacks and complexity. “Having short-term incentives and longterm incentives, it can be really hard for a customer to choose between those. That’s where the broker proposition does become really important, and good brokers can give the right advice,” Adam Brown said. Unlike the other majors, Wendy Brown said Macquarie had never offered cashbacks, for many reasons. “We just didn’t think it was the right thing for our proposition, like you mentioned – long-term customers. We’ve always tried to be very transparent on pricing, putting it into the front card,” she said. “Cashbacks didn’t make a lot of sense for Macquarie Bank from a return-oncapital perspective.” Russell said he was glad lenders had cut back on cashbacks because he was also keen on developing long-term relationships with customers. “I don’t want to see customer churn just to get a short-term incentive. I’d prefer the banks reinvest back into their rates and keep them as low as possible in the longer term, than doing a short-term sugar hit and then boosting the back-book rate later on.” Dietrich said her brokerage liked cashbacks because they were a “nice sweetener”. “They’re not the reason to do the deal, but it’s quite nice at the end, once you’ve refinanced and you can tell them there’s going to be $4,000 in your account, and the clients are really thankful.” But she said cashbacks did pose some
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“When you’ve been in the industry a long time and you’ve got good trail, clawback is not the end of the world, but for new brokers it must be tricky” Desiree Dietrich, The Financial District problems. For example, some clients wanted a $4,000 cashback from ANZ and then six months later they sought to refinance with another bank to secure a $2,000 cashback. “You know that if you don’t do it [refinance the loan], the client would just go to another broker or go direct, so then you get clawed back.”
Broker question from Desiree Dietrich: Brokers are experiencing very high rates of clawback due to sales of properties. Is there anything further that can be done on this issue to make it fairer for the broker involved? Changes to clawback policies? Dietrich elaborated on her question, saying
that clawback was a real bugbear for brokers. “I totally agree brokers shouldn’t churn clients, and if you’re a churning broker, then you deserve to be clawed back.” Dietrich’s brokerage budgets approximately $10,000 per month for clawbacks, mostly because clients are selling their properties. “It’s annoying because you’ve done all that work – the client that claws you back is going to be the client that you’ve worked the hardest to get; that’s just Murphy’s Law.” She said it was great that lenders had shortened their clawback period because two years was just too long. “Sometimes you get to 21 months and there’s a clawback. Then you’ve got to do another deal to make up for that, so you’ve essentially written two deals.”
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“CommBank launched another refreshed tool as part of our investment in the CommBroker Portal. The updates make it simpler and easier to track your applications and provide greater visibility and control of inflight applications” Razia Khan, CommBank “Is there any movement on clawback, especially with sales of properties? Is there anything that you guys are thinking about?” Dietrich asked. Willsallen said Westpac had recently reduced its clawback period from 24 months to 18 months, which Dietrich said was welcome move. “We want to be a good partner to brokers,” Willsallen said. “We’ve had feedback, and we also looked at the market and recognised that we wanted to be aligned to where a lot in the market were.” Brick said ANZ also has a tiered total clawback period of 18 months, and this
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policy has been one of the strongest in the market for many years. “We’re comfortable with where it sits at the moment,” he said. Significant regulatory oversight on broker commissions, including clawback, was a focus of the banking royal commission and Treasury, Brick pointed out. “Whether we want to revisit that is something we would need to consider collectively, as an industry. “With brokers eligible to receive an upfront commission, the banks are actually getting less in the first year. If you change one aspect, then other aspects might come into play as well. It’s a difficult one, but
I take your point, Desiree – brokers are doing a lot of work,” Brick said. Dietrich said clawback interfered with the best interests duty. “We’ll get a client phoning up saying, ‘I’m in a really bad spot; I’m going to have to sell’,” she explained. “You’re thinking we only did the deal six months ago, and you know you’re going to get clawed back. You have to think of the client’s best interests, and you have to give the advice. If you see they can’t afford it [their property], you can’t talk them back from the edge on that. You just have to just suck it up.” She said it was especially hard for younger, new-to-industry brokers who weren’t earning a lot in commissions and then had to cope with a significant amount of clawback. “When you’ve been in the industry for a long time, you’ve got good trail, it’s not the end of the world – you just wear it as a loss; but for new brokers it must be very tricky.” Khan said CommBank had just extended its clawback policy, which would take effect on 1 October. “The biggest change that we’ve made is we had 12 months at 100% [clawback], the next six months at 50%, irrespective of which month you’re refinancing. We have extended that clawback to 24 months, but it’s a gradual decline.” CommBank data indicates that the largest amount of refinancing activity occurs between months 12 and 18, Khan said, meaning that many brokers would benefit from that gradual decline, with the next spike being post 24 months. She said the change to clawback policy was aimed at fostering longer-term relationships with customers and brokers, while also adding back to the customers. Dietrich said there was a time when CommBank used to reverse clawbacks if brokers could prove there was a property sale. She asked if this was still in place. Khan said she had reviewed clawback exceptions and took an approach based on the circumstances that were presented. Adam Brown said NAB also had a 50%
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MAJOR BANKS ROUNDTABLE 2023 VALUE OF NEW HOUSING LOANS BY BORROWER SEGMENT New loan commitments, total housing (a) (seasonally adjusted and trend), values, Australia Total (seasadj)
Owner-occupier (seasadj)
Investor (seasadj)
Total (trend)
Owner-occupier (trend)
Investor (trend)
40 35
% billions
30 25 20 15 10 5 Jul 05
Jul 08
Jul 11
Jul 14
Jul 17
Jul 20
Jul23
a. all series exclude refinancing Source: ABS Lending Indicators, July 2023
“Our retail deposit book is higher than it was pre-COVID. Many home loan customers at ANZ are ahead in their repayments. Since the start of the pandemic, they’ve built up their savings and have increased the equity in their homes as well” Paul Brick, ANZ clawback policy all the way through to 24 months from month 12. He said there had been a lot of loan churn, and the average loan term had come down, driven by greater levels of refinancing; rolling-off of two-year fixed rates; and cashbacks. “This has brought the issue of clawbacks
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much more to the fore, because there’s a shorter lifespan and more churn. We’re looking at clawbacks constantly.” Dietrich said she wondered if the banks should have to take on all the responsibility when it came to clawbacks. “Maybe there’s something we could tax-deduct as a clawback
cost because you’re still getting the cost of two deals for the same amount of money, and you’re only earning one. Maybe the ATO could come to the party,” she said. “Maybe the ATO could allow brokers a ‘cost of clawback’ deduction to cater for the fact that brokers have done a lot of work on a deal and had their income taken away on it. It costs money and time to bring a loan to settlement, and we should get some relief inside our tax returns if the commission gets clawed back.” Russell said he would be happy to trade off a refinance clawback against a sale clawback. “I’d be happy to extend a refinance clawback to three years if we could do a sale clawback to one year. I’m not a broker who churns, so I wouldn’t be worried about pushing that one out to three years. “In PEXA, you can see whether it’s a refinance or a sale very, very easily, so it would be easy for the banks to track that.”
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Broker question from James Russell: My question is on the use of technology to enhance post-settlement services for brokers. What are lenders doing to provide brokers with better access to their client loan information online and streamline loan administration using digital pathways? Russell said some banks were better than others at providing portals so brokers could see their loan book, view interest rates and get data on their clients. He was keen to know what the banks were doing to digitally enhance back-office processes such as loan switches and fixing loans, rather than having to fill out paper forms and do wet-ink signatures. “Can we do that through a portal? What’s each bank doing with regard to that?” Russell asked. Willsallen said currently Westpac did not have the ability to see a broker’s back book on its portal, but it was “definitely something we’re interested in exploring”. “It’s about balancing the other things we’re also trying to invest in to improve the broker and customer experience,” she said.
“Our principle is absolutely, we want to be a digital-first bank. We want to be simpler, easier and faster to do business with, so every time we can take a form out of a process, we think it’s a really good thing, and we’re certainly keen to do it.” Westpac has a number of teams focused on improving broker technology. Some of the tech innovations the bank has brought to market include NextGen ID and prefill comprehensive credit reporting. Willsallen said Westpac was also investing in making further improvements, including to its broker portal. It recently fixed the portal password reset issue and made several other enhancements. Much of the bank’s tech efforts in the last few years have focused on a new mortgage originations platform, which is now up and operational. “We now have one common platform across all brokers and across the bank,” Willsallen said. Brick said ANZ was “continuing to pedal really hard towards digitising our processes and a digital home loan, and we’re engaging with aggregators to design elements of that”. Brick said brokers having access to a
RISE IN OWNER-OCCUPIER VARIABLE INTEREST RATES Outstanding and new owner-occupier loans, in % per annum Outstanding loans
New loans
%
%
7
7
6
6
5
5
4
4
3
3
2
2
2020
2021
2022
2023 Source: RBA, APRA – July 2019 to July 2023
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digital loan proposition was really important to ANZ, especially considering the perception that digital loans could compete directly with brokers for clients. “We’ve made some amazing strides when it comes to technology, and we’ve still got a bit of work to do, but it’s exciting.” At CommBank, Khan said the bank had launched its refreshed broker platform and tested it using a pilot group of brokers. “CommBank recently launched another refreshed tool as part of our investment in upgrading the CommBroker Portal. The updates make it simpler and easier to track your applications and provide greater visibility and control of inflight applications. Mobile optimisation means this is also now accessible on the go.” Khan said CommBank had announced that she would oversee the technology teams as part of her role. “We’ve got dedicated technology teams focused on improving the broker proposition, whether that’s our commission system, Your Loans, our CommBroker portal or Your Applications. How we evolve will depend on direct feedback from our brokers.” Dietrich agreed that the process with CommBank was very easy now. At NAB, Adam Brown said the bank had just refreshed its broker portal to bring a fresh new look and support for customers, and there was more work in the pipeline to further improve functionality. New features included an instant repricing tool, which enabled brokers to just press a button to reprice loans for existing customers and “there was nothing else you have to do”. He said banks had to pick and choose what they did when it came to technology, and in the last 12 months NAB had decided it was existing customers who needed support through a pricing tool. “The other thing that’s coming to our industry, which is great and that we support, is digital documents delivered to customers,” he said. Adam Brown said features such as DocuSign and Digital ID provided accuracy,
without the need for “reams and reams” of paperwork. This type of technology would continue to evolve and would have a key impact on brokers and their customers. At Macquarie Bank, Wendy Brown said the broker team had learnt how to look after brokers when they needed it. The bank’s broker portal had been very successful, but second-order questions were now being worked on. “The broker portal will answer lots of questions on where your application is in flight, what the current pricing is – but it’s the next action we’re up to now.” She said it was now about monitoring customers in the portal and understanding what other problems needed to be resolved. “All of what we do is based around the data. So if you look at digital ID, we are not only solving for digital ID, we are also solving for name accuracy.” Brown explained that because Macquarie Bank was able to get loan documents out on the same day, if brokers had misspelled a name, the documents would have to
“Whether it’s the broker help centre or broker portal, our technology is always on; you just see it’s constant, and our goal is to be much more like the leading technology companies” Wendy Brown, Macquarie Bank be recalled four hours later. A positive outcome was that the bank had been able to discover pain points such as these. When it came to digital ID, Brown said Macquarie Bank was trying to improve accuracy on the initial file coming in. The goal was to ensure documents were being sent out as quickly as possible after formal approval. “I think that’s really changed our mindset about digitising everything,” Brown said. She pointed out that if banks didn’t really invest in the process behind the
system, then the technology was never going to solve all the problems. “We look at where the clicks are, where the usage is, where the pain points are. We have a weekly meeting listening to broker feedback and call centre questions, and that tells you where the next technology innovation is,” Brown said. “Whether it’s the broker help centre or broker portal, our technology is always on; you just see it’s constant, and our goal is to be much more like the leading technology companies like Amazon and Google – you’re just going to notice the difference.”
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Non-bank forges powerful alliance with brokers As Pepper Money’s product range and services grow, the lender is working hard to continue deepening its relationship with brokers. This is reflected in its excellent performance in the 2023 Brokers on Non-Banks survey
NON-BANK LENDERS are being increasingly embraced by brokers and their customers in a highly complex mortgage market. Non-banks have a greater appetite to lend to customers who don’t fall into the ‘vanilla’ category favoured by the larger banks. Their approach to credit is more flexible, and they can tailor finance solutions that take into account each customer’s unique circumstances. One of Australia’s leading non-bank lenders, Pepper Money has successfully established itself in this market by helping customers who are often overlooked by the banks. It prides itself on being nimble, adapting to the everchanging lending needs of the market and providing diverse loan options to brokers and their clients, including residential, commercial and asset finance, as well as car loans and personal lending. For Pepper Money and other non-banks, the support of brokers is crucial – more than 95% of Pepper Money’s mortgages are originated by brokers. MPA’s Brokers on Non-Banks survey is a useful tool for lenders to gauge their performance across a range of criteria, based on the feedback of brokers across the country. Pepper Money once again secured one of the top positions among the non-banks rated
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by brokers, and we caught up with Barry Saoud, general manager, mortgages and commercial lending, to discuss its performance.
Broker’s Five-star BDMs list this year: “It’s no surprise that we have more award-winning BDMs than any other non-bank across the
“As customer scenarios are increasingly becoming more complex, Pepper Money continues to be at the forefront of supporting our brokers with troubleshooting complex scenarios with speed, consistency and confidence” Barry Saoud, Pepper Money BDM support Pepper Money ranked first overall for its BDM support. Saoud says brokers appreciate the role great BDMs can play in helping their businesses thrive. “It’s these people who help us deliver on our mission,” he says. According to Saoud, Pepper Money not only secured the top position for BDM Support in MPA’s Brokers on Non-Banks survey, but it also emerged as the non-bank with the highest number of award-winning BDMs in Australian
country, and these results reflect our highperforming, values-driven people.” “As customer scenarios are increasingly becoming more complex, Pepper Money continues to be at the forefront of supporting our brokers with troubleshooting complex scenarios with speed, consistency and confidence. “Pepper Money BDMs are actively workshopping applications with brokers, even when it might look like a no on the surface. Our team are committed to investing time
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PEPPER MONEY HIGHLIGHTS Oct 2022 Recognised in the 2022 AFR Boss Top 10 Most Innovative Companies list Dec 2022 Awarded KangaNews Australian Nonbank Financial Issuer of the Year Feb 2023 Removes commercial mortgage clawbacks Mar 2023 Awarded WeMoney Non-conforming Lender of the Year Apr 2023 Pioneers a fixed interest rate loan with a competitive rate and no break costs
and effort in exploring alternative approaches, always asking, ‘If we can’t do it this way, can we do it that way?’ ” Saoud says brokers continue to provide feedback to Pepper Money, acknowledging it’s the exceptional dedication of its BDMs, who go above and beyond to make sure they feel supported – in all aspects of their lives. “It’s the ‘can do’ attitude that Pepper Money’s BDMs are celebrated for. They go above and beyond to ensure brokers are supported across all aspects. Many of our BDMs who have been in the industry for a long time are passionate about finding ways to back brokers to grow their businesses.” Pepper Money’s momentum is not slowing down, says Saoud. “We continue to focus on delivering consistency across the BDM network, improving our service proposition, deepening relationships with our existing partners and building collaborative relationships. “Ultimately our BDM team play a key role in delivering our market-leading and innovative broker service proposition.” Saoud says Pepper Money is proud of its reputation in this area. “Our BDMs offer invaluable support to brokers in market,
which is reinforced by the same methodology that our credit assessors use when they assess the application.”
Credit policy Brokers’ votes won Pepper Money the silver medal for its credit policy, which provides brokers with access to diverse loan options for boundless borrower profiles, such as selfemployed individuals or those with unique financial circumstances. Saoud says Pepper Money’s loan options “are as diverse as our brokers’ clients”. “Our brokers are confidently able to help more clients and increase their client satisfaction with our comprehensive range of policy options. These options include a wide range of acceptable income types, no limit to debt consolidation or cash-out, up to 40-year loan terms, serviceability options, and more.” The non-bank lender has also expanded its product and policy offering across the year, in response to market needs. “This year, we changed the way we price interest-only and investor loans and expanded our credit policy in both residential and commercial, giving our customers increased choice and
Aug 2023 Launches Red Hot Rates campaign with same-day response serviceability options for eligible clients
allowing us to provide options for more families,” Saoud says. Recognising an opportunity to help Aussies feeling the pressure of rising interest rates and the cost of living, in April Pepper Money launched an Australian market first – an innovative and flexible fixed rate with no break fees. Saoud says this new product allows customers to cap their repayments but also gives them the flexibility to break the fixed rate with no penalties should rates start to drop in the future. In addition, Pepper Money also relaunched its commercial real estate offering and removed clawbacks from its commercial real estate products earlier in the year. “There is no substitute for the commitment brokers provide to their SME clients, so we took this step,” Saoud says. “We’re backing the growing number of brokers that are diversifying their offering and supporting another SME’s business. We listened, and this was a welcomed change.” Saoud says Pepper Money recently introduced a Red Hot Rates Package, with a 2%
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MAKING NON-BANK LENDING EASIER THAN EVER
Digital identity verification
Simplified valuations
Loan statements
Real-time digital verification of identity (VOI) with NextGenID
Automated and electronic home loan valuation options and commercial valuation ordering on CoreLogic Propertiy Hub
Removal of loan statement provision to verify Repayment History (CCR) for refinance loan assessment
serviceability buffer and same-day turnarounds, to help address real-life challenges for brokers and their clients, including high inflation and interest rates.
Communications, training and development This was another category in which Pepper Money excelled, receiving a bronze medal. Saoud says Pepper Money’s broker education and broker support are the “cornerstones for building our proficient and informed network of brokers who act as Pepper Money’s front line” with their clients. “Effective training ensures our brokers are well versed in our range of products, our flexible policies and options, enhancing their ability to serve their clients with confidence. “Our Insights webinar series and live events are a continuous education program that keeps brokers updated on evolving market trends, regulations and our innovative lending solutions – equipping them to adapt and excel in dynamic financial landscapes.” Insights Live has been Pepper Money’s marquee thought leadership event for brokers and introducers for the past seven years, says Saoud. “In July, we hosted over 1,000 broker and introducers nationally, making it our biggest event yet.” Saoud says a well-informed and educated broker network not only enhances the Pepper
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PPS Enhancement to Pepper Product Selector, continuing to optimise broker experience
Money experience but also fosters trust among borrowers, leading to increased business, improved loan quality and long-term success for brokers in a highly complex lending landscape.
Broker feedback Saoud says “keeping our finger on the pulse is crucial to continually improving our offering and providing tangible value to brokers and their customers”. Pepper Money practises ideation and open dialogue with its extensive network of aggregators, white label partners, brokers and customers to understand the challenges being felt in the market. “Starting here helps us to ensure our lending options meet the unique needs of brokers and their customers, filling the gaps where other lenders fall short,” Saoud says. He says that without its valued brokers and partners, Pepper Money would not have been able to help over 409,000 customers achieve their financial goals since 2004.
Non-bank sector growth Saoud says the sector and Pepper Money are poised for continued growth in the future. “The non-bank segment is growing at an estimated 4.3% a year between 2017 and 2022, and there is certainly more room for growth on the horizon for us.”
Electronic signing NextGen e-signing of documents and compliance tab
Saoud says borrowers are seeking greater flexibility than what banks typically can offer, and non-bank lenders such as Pepper Money are stepping in to fill the gaps and meet customer demand. “We offer greater flexibility and a willingness to accommodate a wider range of borrower circumstances, such as the self-employed or borrowers with less-thanperfect credit histories. “Instead of using algorithms, Pepper Money takes a more flexible, human approach that allows us to assess loan applications individually with consistency and speed. Our loans can be suitable for all sorts of people, individuals from blue-chip to blue-collar.” When it comes to specific growth areas, Saoud says commercial real estate loans are a hot commodity for Pepper Money. “We have seen a significant increase in applications and volume in this space. Pepper Money has made the submission process almost identical to submitting a residential loan. More mortgage brokers are diversifying into commercial real estate and are turning to Pepper Money because we have stripped away the complexity.” Saoud says Pepper Money is committed to making non-bank lending easier than ever – across BDM support, credit policy and products, broker experience, digital capabilities, consistent and straight-through decisioning, and more.
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SECTOR FOCUS: SME LENDING
Lending volumes set to rebound Despite a host of economic challenges that have dampened demand for business finance, there are signs that a better market is on its way, with lenders and brokers ready to help the nation’s SMEs
WITH GLOBAL economic challenges, rising interest rates and inflation, supply chain bottlenecks and labour shortages, a cavalcade of problems have hit Australia’s small to medium-sized businesses in the last 12 months. This is reflected in the June 2023 Equifax Quarterly Commercial Insights report, which showed that while asset finance applications had increased by 7.8%, overall business credit applications had fallen by 1.3%. But the path ahead is looking better. ABS monthly figures for the 12 months to August showed a rise of 5.2% in inflation, but this was down from 5.4% in June and 8.4% in December. The RBA has also kept the cash rate on hold for the last four months, with many experts believing the rate-hiking cycle is at its end. Interest rates cuts are predicted for 2024. Non-bank lenders Aquamore, Grow Finance, OnDeck Australia, RedZed and Prospa have given MPA their insights on the SME market and the key role of brokers. They say brokers need to stay in touch with their SME clients, assist them with
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cash flow management and direct them to the right loan options to help them grow in better times.
Factors affecting SME demand for finance Adrian Fisher, head of distribution and product at RedZed, says cash rate uncertainty and a gloomy global economic outlook
rebound from the impacts of COVID whilst managing the effects of high inflation and an employee-favoured market,” Fisher says. Changing levels of business confidence and challenging business conditions, as well as doubt over future cash rate decisions, mean many business owners have sat back and adopted a ‘wait and see’ approach, thus impacting lending demand.
“Stability or a gradual decrease in the cash rate will give borrowers confidence to invest in wealth creation, and will encourage business owners to invest in business growth” Adrian Fisher, RedZed have likely contributed to the decline in SME lending demand. “Index results have shown fluctuations in business confidence and conditions over the past 12 months as businesses continue to
“However, in times of uncertainty it’s often those who are brave, innovative and prepared to step outside of their comfort zones that reap the rewards,” says Fisher. OnDeck Australia CEO Cameron Poolman
says an overall decline in business lending of 1.3% year-on-year does not indicate an ongoing trend or a massive fall in demand for finance. “Asset finance jumped 7.8% in the quarter as small businesses took advantage of temporary full expensing ahead of 30 June,” Poolman says. “However, there is no doubt some small businesses are feeling the squeeze of reduced household spending as Australians juggle rising living costs and mortgage interest rates that have jumped 4% in the space of 12 months.”
Poolman says it’s worth pointing out that – as Equifax notes – a key driving factor behind the reduction in business lending is not demand; it’s more on the supply side as lenders impose tighter borrowing conditions. “This highlights the value of small businesses looking beyond their everyday bank for commercial finance and discovering the benefits of partnering with a lender that only focuses on small business funding.” Matthew Porch, head of distribution at Aquamore, encourages brokers to firstly
focus on the substantial growth in asset finance applications, which is a good indicator of business confidence. “Conversely, market turbulence, rate uncertainty, labour shortages and an increase in goods/operations have understandably affected the appetite for business loans.” Porch says he expects business owners to continue to be cautious about additional spending, compounded by the cost of borrowing becoming more expensive. “This apprehension affects a broad spectrum of commercial finance, though it should
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SECTOR FOCUS: SME LENDING be viewed in the context that Australia continues to demonstrate a robust economy,” he says. Prospa national sales manager Roberto Sanz says the decline in small business lending demand could be attributed to different factors, including stubborn inflation, the rising cost of debt, tighter borrowing
stability and remain relatively stagnant in the meantime.” Aquamore anticipates a bearish market in 2024, with limited growth in credit. “That said, it’s important to recognise that not all sectors are in distress and that there are plenty of ‘opportunity takers’, particularly in manufacturing, transport and logistics.”
“Specialist small business lenders offer a far simpler and quicker application process, and deliver fast response times for loan applications” Cameron Poolman, OnDeck Australia conditions and shrinking levels of discretionary spending by consumers. “Against this backdrop and with higher operational costs, small businesses may be cautious to take on additional debt or look for alternative sources of finance,” he says. Sanz says a slowdown in wage growth could also make it harder for households to have income available to spend at small businesses, which could impact sales in the coming months. David Verschoor, CEO at Grow Finance, says the increase in asset finance applications likely had a direct correlation to the instant asset write-off initiative and EOFY where purchases were brought forward into FY23. “With the fall in business loan and trade finance, this is a space we are watching closely as we may be seeing a decline in demand as a result of businesses reducing inventory due to the decline in economic activity and rate rises,” says Verschoor.
Future outlook Consumer sentiment rallied in July 2023 on the back of an interest rate pause in the “perhaps naive anticipation that rates would be retained indefinitely”, says Porch. “On the contrary, it’s very clear that the rate pause is not expected to be infinite. We expect demand for finance to coincide with rate
Sanz says the environment of higher inflation and interest rates has negatively impacted business demand and put strains on SMEs’ supply chain and the cost of materials and goods. “With these pressures easing in a stabilising environment, we can expect to see small business owners more confident to commit to external funding to capitalise on growth plans and/or cash flow cover for the months ahead.” June data shows that a third of SMEs are strategically prioritising launching new prod-
ucts or services over the next six to 12 months to help drive consumer demand, Sanz says. “Prospa knows more and more small business owners are looking to their brokers to inform their decisions on borrowing products, with 21% of SMEs specifically seeking out their advice. “This growing dependency on brokers could create further opportunities for financial advisers to diversify into SME lending, and drive a need for more advisers to keep an eye on the competitive landscape.” Grow Finance is seeing a normalisation of demand for financing as the December quarter approaches, Verschoor says. However, he believes the September quarter is likely to be soft across the board. “Leading into the back end of the year, we will likely see a vast increase in business loan applications due to businesses requiring cash to see them through the falling period of demand,” he says. “Businesses will have the ability to operate with greater clarity and certainty with respect to ongoing cash flow and funding requirements, which often brings a renewed focus on investment in innovation, diversification and expansion.” Grow expects many businesses will look to recapitalise some of their funding
STRONG GROWTH IN ASSET FINANCE APPLICATIONS OVERVIEW OF ASSET FINANCE APPLICATIONS BY STATE, Q2 2023
YoY change (%)
YoY change (%)
QoQ change (%)
8%
-2%
22%
NSW
3%
-4%
16%
VIC
11%
4%
25%
QLD
9%
-3%
22%
WA
15%
-7%
33%
SA
8%
-5%
27%
TAS
2%
1%
16%
ACT
1%
-6%
23%
2022
Australia
2021
Source: Equifax Quarterly Commercial Insights – June quarter 2023
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SECTOR FOCUS: SME LENDING facilities to more favourable solutions. Verschoor says supply chain and labour shortage issues should ease, “all of which naturally creates opportunity and increased demand for various financial solutions”. Fisher says history has shown that when the cash rate is stable, demand for credit is strong. “Stability, or better yet a gradual decrease in the cash rate, will give borrowers confidence to invest in wealth creation opportunities, and encourage business owners to invest in business growth.” Many experts are predicting a more stabilised interest rate environment, with some suggesting that a reduction in rates might be on the horizon. Fisher says it’s
return of confidence, which will drive demand for business finance.”
Broker partnerships with clients, lenders Woszczalski says that before speaking to clients about products, it’s important for brokers to ask questions to understand how the business is performing and what’s keeping the owners up at night. Once this is known, brokers will find themselves in a “well-informed position to engage with their lender panel, and source and recommend the right solutions”. “We know that the best and right time to access money for the business is when you
“Aquamore consistently collaborates with lenders in the non-bank and fintech sectors to educate brokers about SME lending, and also regularly hosts educational webinars” Matthew Porch, Aquamore encouraging to see inflation tracking down towards the desired target range. “We expect history to repeat itself and are confident that lending volumes will rebound swiftly as a result of borrowers returning to the market.” Poolman says most economists expect interest rates to drop some time in 2024. “When this happens, the small business sector will benefit from a boost to consumer confidence, which is critical for household spending.” Australian households are sitting on a record $1.4trn in personal savings, says Poolman, so there’s cash available for personal spending, but current uncertainty means many consumers are adopting a wait-and-see approach to spending. “Once interest rates and inflation have settled into more normal patterns, I’m confident we will see an uptick in spending and a
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can get it rather than when you need it. A business loan overdraft is the perfect solution for many SME customers as you don’t need to pay for it now but can still access the funds.” Grow has set up a standalone team providing increased support to brokers who may not be confident in its product suite, or who are in the process of diversifying or simply want to spot and refer more deals. “Our sales and credit staff are on hand nationally to assist brokers and their clients with larger and more complex opportunities, and on the flip side, our online tools and broker portal enable experienced brokers to operate seamlessly and with a high level of independence and confidence,” says Woszczalski. Aquamore encourages brokers to discuss cash management strategies, including possible cash flow solutions, with their clients to minimise their exposure.
Debt consolidation is prevalent, Porch says. “Aquamore is writing a record volume of bespoke debt consolidation facilities whereby we’re replacing SMEs’ short-term, higherinterest-rate loans with more competitive medium-term debt solutions with more manageable terms.” Porch says brokers should also review their clients’ spending, invoice management and trade terms to see where savings can be made and where changes to terms could “alleviate cash flow concerns for a more manageable day-to-day cash position”. “This should ideally be done in conjunction with the business’s accountant.” Sanz says that with interest rates rising and business margins being squeezed, small businesses need their brokers more than ever. “For mortgage brokers, anticipating their clients’ needs and being ready to act will ensure they have the right solutions in place for their clients’ cash flow needs. “This means asking questions about the client’s business, and investigating options to support cash flow. What is their cash flow forecast? What pain points or opportunities are on the horizon? What investments could set them up for both short- and longterm growth?” By empowering mortgage brokers to diversify their revenue streams and get involved in business lending, Prospa helps them engage with their clients about potential cash flow issues and anticipate opportunities for growth. Sanz says it’s not about brokers deviating from their core business but about Prospa offering a ‘spot and refer’ service model that enables mortgage brokers to make the most of opportunities without overinvesting outside their core businesses and in turn support small business clients. Prospa provides tools and training to help brokers identify opportunities to address the cash flow challenges of their SME clients. “Simply engage with our team of dedicated business development managers or access the Prospa Partner Portal, which
helps streamline the rest of the process,” says Sanz. Poolman says brokers need to let their small business clients know that there’s an alternative to traditional banks when it comes to finance. “It’s not just about partnering with a lender that understands small business and how it works,” he says. “I’d encourage brokers to help their small business clients know that specialist small business lenders offer a far simpler and quicker application process and deliver fast response times.” As a guide, OnDeck’s popular Lightning Loan product for funding up to $175,000 requires just six months of bank statements, Poolman says. “We can have an assessment to the broker within 30 minutes and funds to their small business client in as little as two hours. This level of speed allows the business to action their plans immediately.” Fisher says that unlike a typical “mumor-dad borrower” who might only engage with their broker once or twice during their loan term, self-employed borrowers are often looking for a “trusted advisory panel” that they can turn to regularly – usually their accountant, financial planner, business coach and finance broker. “It’s essential that brokers talk to their SME clients at length and understand their businesses intimately, beyond financial statements. Business life-cycle stage; short-, medium- and long-term business plans; and the importance of securing the right amount of funding for sustainable growth should be discussed,” Fisher says. Equipping clients with finance product knowledge is also key to helping them achieve business goals, he says. “The right product at the right time can be incredibly valuable to a business, whereas the wrong product can have disastrous effects.” RedZed’s highly skilled BDM team are experts in self-employed lending and work incredibly hard with brokers to help them deliver superior outcomes to customers, Fisher says. RedZed has invested in a self-employed-
centric training course to educate brokers about self-employed borrowers. Known as RedZed’s Self-Employed Broker Academy, it will be launched in October. Fisher says it highlights the opportunities in self-employed lending, dispels any fears or misconceptions brokers may have about working with self-employed customers, and provides brokers with the knowledge and tools they need to embrace this community. “There is even a module dedicated to understanding financial statements as some brokers avoid working with self-employed clients due to their lack of confidence in this area.”
Challenges SMEs face – and the solutions Sanz says cash flow management is a challenge for many small businesses, with rising prices and high borrowing costs affecting their margins and profitability. “For small businesses with mortgage debt, higher scheduled mortgage payments are a key driver in limiting spare cash flow.” Borrowers with variable rate loans have
experienced large repayment increases, and there are early signs of financial stress as SMEs struggle to service their loans and run their businesses. Sanz says Prospa is leading the way with simpler, stress-free and seamless financial management services. “We’re bringing back together the financial products that have become fragmented, to create a singular, holistic customer experience, empowering small business owners to take control of their financial health and their growth potential.” Prospa also has a dedicated team of loan writers and senior credit officers who work directly with brokers on larger deal sizes to ensure these are assessed before going for credit approval. “This premium service is highly regarded by all our partners, specifically commercial brokers.” Fisher says the biggest problem facing SMEs is the uncertain economic outlook and the potential impacts it could have on businesses. “However, this uncertainty could be used to the advantage of those brave enough to push forward regardless and keep them one step ahead of their idly sitting competition.”
YOY DECLINE IN BUSINESS CREDIT DEMAND BUSINESS CREDIT CARD APPLICATIONS Year-on-year changes, Q2 2023
Australia
QoQ
YoY (2022)
YoY (2021)
17.0%
-1.3%
-5.1%
Overall business credit demand in Q2 2023 was marginally lower (-1.3%) than Q2 2022 and moderately lower (-5.1%) than Q2 2021 Asset finance
21.7%
7.8%
-1.9%
Business loans
17.8%
-4.0%
-6.5%
Trade credit
5.8%
-2.1%
-3.5%
Source: Equifax Quarterly Commercial Insights – June quarter 2023
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FEATURES
SECTOR FOCUS: SME LENDING RedZed provides finance solutions for self-employed borrowers backed by residential or commercial property, Fisher says. “Aside from purchase and refinance loan purposes, we also provide finance to assist business owners with working capital, acquisition of business and personal assets, repaying ATO debt, consolidating personal and business loans, and much more.” He says RedZed’s continued investment in technology has helped the team achieve consistently fast turnaround times. “Simple, fast and fair is a phrase synonymous with our business – simple process, fair assessment and fast approval,” Fisher says. Poolman notes that small businesses face a variety of challenges: labour shortages, supply
of business owners. It’s a plus for newer enterprises that don’t have extensive trading data, and for sole traders and partnerships, which don’t generally have the substantial volume of commercial data required by traditional lenders. “By using a mix of commercial and consumer credit history plus cash flow, OnDeck is able to build a holistic risk profile in just minutes, giving small businesses improved access to the fast funding they need,” Poolman says. At Grow, Verschoor says one of the bigger problems facing SMEs is the uncertainty surrounding the December quarter due to falling consumer demand, possibly impacting on the Christmas rush.
“SMEs’ growing dependency on brokers could create further opportunities for financial advisers to diversify into SME lending” Roberto Sanz, Prospa chain bottlenecks and consumers being more careful with their spending. “Tighter borrowing conditions among lenders are an added hurdle for small businesses,” he says. While not every business is doing it tough, Poolman says those looking to invest and expand often find it difficult to secure finance because their bank either won’t come to the party or because they face a protracted application and approval process. “As a fintech, OnDeck uses a technologydriven approach to assess credit applications. Our KOALA Score™ risk-predicting credit model uses a sophisticated blend of big data, predictive analytics and statistical techniques in combination with data from multiple credit reporting agencies, including illion and Equifax, to support more tailored risk assessment for Australian small business lending.” Poolman says KOALA gives OnDeck the ability to analyse the personal credit scores
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“We’ve seen retailers begin to cut back on spending and stock heading into the back end of the year as they expect to see reduced customer demand,” he says. Another ongoing challenge for businesses is ensuring they have the right financing to operate efficiently and effectively while resisting the temptation to enter into short-term ‘Band-Aid’ solutions that may not be sustainable or beneficial. Verschoor says Grow offers a range of products to help SME clients better manage their cash flow and operate more efficiently, including asset finance, business loans and insurance premium funding. “We utilise market-leading technology to ensure brokers can access our products online with absolute ease, offering some the quickest turnaround times on applications and settlements in market.” Porch says cash flow management remains an ongoing challenge for many businesses.
“We continue to see a lot of strong clients who just aren’t managing their inflows and outflows efficiently. “To address this, Aquamore has a fully drawn advance interest-only product that’s been created to support businesses in consolidating debt or that need an equity release to assist with working capital requirements when cash flow is tight or needs to be massaged.” Aquamore has also recently extended its interstate BDM team and credit and operations team “to ensure we continue to make quick and consistent credit decisions”, Porch says.
Diversification opportunities Poolman says a broker’s business is an outstanding personal investment – and all investments benefit from diversification. “Expanding into commercial lending gives brokers an additional revenue stream and the opportunity to engage with new clients and build new network partners to grow referrals and repeat business,” he says. “OnDeck supports our broker partners to achieve this diversification with a freely available suite of marketing collateral.” Brokers are also encouraged to use the Know Your Score online tool as an ice breaker with small businesses, to help them understand that their enterprise has a credit score and the strategies that can keep their score healthy. Poolman says more than 2.5 million businesses operate nationally – the vast majority being small. “Given the sheer numbers, it’s almost certain that brokers will have small business owners among their existing client bases. This can make existing clients a good place to start, and it allows brokers to establish themselves as a one-stop shop.” Woszczalski says the benefits of broker diversification are very real in terms of futureproofing their income streams, increasing earnings and fostering client retention. “Like Grow, there are a number of lenders and advisory services in market who have the infrastructure in place to make diversification into business lending seamless,” he says.
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SECTOR FOCUS: SME LENDING
“The increase in asset finance applications likely had a direct correlation to the instant asset write-off initiative and EOFY where purchases were brought forward” David Verschoor and Greg Woszczalski, Grow Finance “We believe we can give mortgage brokers the same strong experience that we are currently giving to our commercial and asset finance brokers,” says Woszczalski. Grow operates a dedicated team to assist mortgage brokers by providing the required training, support and tools to ensure they are set up for success. Woszczalksi adds that updating digital marketing and advertising efforts ensures maximum exposure to both existing and potential clients, increasing awareness and reach to the right audiences. “Feedback from the many brokers we deal with daily is that, on average, over 30% of their existing client base is made up of small business owneroperators, and this is a natural place to start.”
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Fisher says there are challenges and risks for brokers who only offer residential lending solutions to mum-and-dad borrowers. “Diversification is regularly discussed within industry circles and at broker events because it’s not only a way of spreading risk, but it strengthens client relationships and supports business growth.” Diversifying into the self-employed space can open doors to a wide range of finance solutions, including business loans, overdrafts, asset finance, invoice finance, commercial loans and more. Fisher says self-employed borrowers represent a great deal of value to brokers because they generally transact more frequently, often require a diverse range of
loans and are typically easier to retain as clients because they appreciate the support and enjoy accessing a variety of solutions in one place. For RedZed-accredited brokers, Fisher says the lender’s Self-Employed Broker Academy is the perfect training ground for residential brokers looking to diversify into SME lending, as well as those eager to upskill in servicing their self-employed clients. “For those not yet accredited with us, we encourage you to contact your local RedZed BDM and start the accreditation journey.” Porch says there’s widespread acceptance of diversification into alternative finance, particularly in the commercial sector. “It’s encouraging to see so many brokers proactively upskilling to understand the nuances of the different lending profiles. Aquamore consistently collaborates with lenders in the non-bank and fintech sectors to educate brokers about SME lending, and also regularly hosts educational webinars.” Sanz says mortgage brokers have achieved the most difficult first step of any business: customer acquisition. “They have delivered value and built trust with their self-employed or business-owner customers by helping them acquire or refinance their homes. “Why not ask the next question? How are you managing your business cash flow? If they are not asking this question, it’s a lost opportunity, because if there is one thing that’s certain in our world, it’s that every business owner requires fast access to cash at some point during the year.” Prospa has pioneered a system that makes it easy for brokers to diversify into cash flow lending, says Sanz, whereby the lender does the hard work for the client but the broker ultimately holds the client relationship. “By offering a menu of services and providing proactive guidance and assistance on asset structuring and cost minimisation, brokers can transition from solely facilitators of mortgage transactions to business advisers, allowing them to open new revenue streams and build longer-term relationships.”
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SECTOR FOCUS: FIRST HOME BUYERS
Homeownership dream remains alive Rapidly rising property prices and interest rates have made it tough for first homebuyers, but achieving their goals is not impossible with the help of lenders and brokers
GETTING YOUR foot on the property ladder is much more difficult than it used to be. Wages have not kept pace with the rapid rise in property prices, and while values dipped for a period as inflation and interest rates increased, prices are now on the rise again with a flurry of activity expected in the spring selling season. PropTrack’s Housing Affordability Index for August reveals that housing affordability is now
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at its worst level in at least 30 years. Households earning the median income of just over $105,000 can afford the smallest share of homes since 1995 when records began, at just 13% of homes sold in the past year. ABS data shows the mean price of residential dwellings rose to $912,700 in the June quarter; to pay the 20% deposit a borrower would need more than $182,000. But the first home buyer’s dream remains
alive and well. Many economists believe the RBA is done with raising interest rates and predict cash rate cuts in 2024. This will give first home buyers some hope that homeownership might become a bit easier. What first home buyers are looking for is a knowledgeable expert who understands the property sector, the home loan market and the various FHB government grants. This is where mortgage brokers come in – they can lead
clients through a myriad of lending choices, remove complexity and help them select the loan that’s right for their circumstances. To explore the first home buyer sector, MPA talks to Glenn Gibson, head of sales and distribution at ING Australia; Ian Rakhit, general manager third party, Bankwest; Bluestone Home Loans chief sales officer Tony MacRae; Helia chief commercial officer Greg McAweeney; and Blake Buchanan, general manager, Specialist Finance Group.
State of the first home buyer market “The first home buyer market remains relatively subdued, probably in large part due to the ability to accumulate a deposit; affordability – low wage inflation and strong price growth, for example 3.8% in Sydney in the last three months; borrowing capacity; and limited supply,” says ING’s Gibson. Rakhit says ongoing Bankwest research indicates that young people without a home loan have mixed sentiments about homeownership in Australia. “Year-on-year, the proportion of Gen Zs feeling homeownership is not achievable is growing,” he says. “Recently we found that 30% felt the goal is unobtainable, compared with 27% in 2022 and 24% in 2021. “Yet the Great Australian Dream remains very much alive for many other aspiring homeowners, with 75% of Gen Z telling us that the goal of homeownership remains important to them – an 8% increase since 2021.” MacRae from Bluestone says the first home buyer market has bounced back solidly since February this year. “We’re seeing first home buyers incentivised to leave the rental market and buy, due to rent increases and uncertainty around vacancies,” he says. “In fact, first home buyers now account for 28% of owner-occupied properties, above the usual average of 25%. Of course, this varies between states, as first home buyers favour more affordable locations.” McAweeney says Helia’s latest Home Buyer Sentiment Report 2023 found that first home buyers are signalling a “don’t give
“More homebuyers are recognising the value of lenders mortgage insurance and other pathways to overcome the deposit barrier and help them achieve homeownership sooner” Greg McAweeney, Helia up” attitude, with 60% indicating it’s a good time to buy for them. “As rental prices continue to climb, an increasing number of people are finding it difficult to sustain the financial burden, with 48% of first home buyers signalling that unaffordable rents have tipped them to consider homeownership,” McAweeney says. “The prospect of building equity and achieving greater control over their housing expenses has become increasingly attractive. Given recent interest rate rises and increases in cost of living, aspiring homebuyers are realistic, with over 85% understanding that their first home will not be their dream or ideal property.” SFG’s Buchanan says property is tough to get into, especially for first home buyers. “The data shows fewer younger Australians are able to purchase their first home, particularly now as interest rates are much higher than – and nearly double – what they were a
decade ago,” he says. “Whilst there are various first home buyer incentives offered around the country, they are not entirely addressing the issue of young people’s homeownership, and coupled with the complexities of obtaining finance for what are usually highly geared transactions, this market has been shrinking in recent times.” However, Buchanan says this sector is an example of the great work brokers do in terms of coaching, assisting and fulfilling first home buyers’ dreams of homeownership. “Without brokers there would be even fewer [homeowners].”
What are the solutions to housing affordability? MacRae from Bluestone says saving for a deposit is a challenge, but the sooner first home buyers get into the market, the better. “Where costs like stamp duty and LMI
HOUSING AFFORDABILITY LOWEST ON RECORD PropTrack Housing Affordability Index 1.00
0.75
0.50
Lowest on record
2.5
0
1995
Declining affordability
2000
2005
2010
2015
2020
2025
Source: PropTrack Housing Affordability Report, August 2023
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FEATURES
SECTOR FOCUS: FIRST HOME BUYERS
infringe on deposits, we advise first home buyers to look to alternative lenders if they need to,” MacRae says. “For example, our flexible, broad policy range assists first home buyers to break into the market sooner with initiatives like 90% LVR and no LMI, simple income verification and no credit scoring.” An increasingly popular strategy for first home buyers is rentvesting, MacRae says. This involves purchasing an affordable property with good rental returns and capital growth potential and renting it out, and then the first home buyer rents a property in the area they would like to live in. “The rent on their purchased property pays the mortgage and may contribute to their living rent. This approach allows first home buyers to get a foot in the door and harness the benefit of capital growth to fund a further investment or owner-occupier purchase in the future.” According to Helia’s Home Buyer Sentiment Report, the two obvious challenges of the homeownership journey that first home buyers clearly acknowledge are affordability (90%) and saving for a deposit (78%). McAweeney says this is driven by many factors, including a lack of supply in some areas, high interest rates and cost of living pressures. “As a result, more homebuyers are recognising the value of lenders mortgage insurance and other pathways to overcome the deposit barrier and help them achieve homeownership sooner,” he says. “Awareness of alternative pathways and the role they might play in achieving homeownership is important in determining outcomes for aspiring first home buyers who may not have a 20% deposit.” Helia’s report shows that first home buyers are weighing up other options, including financing at greater than an 80% loan-tovalue ratio with help from LMI; and 60% are likely to use LMI to bridge the deposit gap. Buchanan says affordability is a complex issue to tackle with limited supply, and assistance for first home buyers not going far enough. “We really need better industry consultations around assistance for first home buyers,
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“A prospect today is a client tomorrow in some format, so keep your prospective clients close, keep engaging, and be available to them as needed if these are the clients you want” Blake Buchanan, SFG SAVING A DEPOSIT STILL A CHALLENGE Time needed to save a deposit – Australia 7 years 6 years 5 years 4 years 3 years 2 years 1 year
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2020 Source: PropTrack Housing Affordability Report, August 2023
or the balance between investors and homeowners will be further out of balance, adding to the cost difficulties of homeownership.” In addition to releasing more land, the government could look at the tax deductibility of homeownership expenses for a period of time, Buchanan says. “I’m a big fan of property ownership in Australia, and so I would say to first home buyers that the best time to learn about ownership is now. “Speak to a broker regardless of your readiness today so that you can understand the process and what you need to get onto the ladder. They will either find a solution or be
able to assist with a plan.” Gibson says brokers are a great option to help first home buyers navigate the complexities of buying their first home. Important facts to consider include: • government support and eligibility requirements that could help customers shave time off their savings plan, enabling them to get onto the property ladder sooner • the homebuying process, who needs to be involved, when and why • the full costs of buying a home – customers often don’t realise the full cost until they’ve reached their deposit savings goal and ask
for a pre-approval, ready to hit the open homes. This is when they start to realise the additional costs of LMI, stamp duty, legal fees and bank fees • the family guarantee policy – lenders generally accept parents, grandparents and siblings for security guarantees • favourable purchases as an option for some customers – where a property is purchased, usually from a relative or close friend, at a below market value
How brokers can help first home buyers Rakhit points out that there are always challenges and opportunities in the property market, and it’s important to provide first home buyers with the support they need in the current environment. “We’re focusing on certainty and speed of process to support our customers and brokers,” he says. “Brokers are the ideal advisers for first home buyers in this market, as they are able to impartially support aspiring homeowners with solutions that are best for their unique circumstances – solutions that consider much more than just rates.” Rakhit says this is why Bankwest prides itself on the collaborative relationship it has built with brokers, “ensuring we deliver the tools and processes that meet their needs and expectations to support them in delivering the best experience for customers”. Buchanan says it’s really about brokers having thorough conversations with prospective purchasers, teaching their clients and setting goals. “A prospect today is a client tomorrow in some format, so keep your prospective clients close, keep engaging, and be available to them as needed if these are the clients you want.” At Helia, mortgage brokers are recognised as a trusted source of information, with 79% of homebuyers indicating that brokers help cut through the complexity of homebuying, says McAweeney. “A vital first step in supporting homebuyers
is to provide education and information on pathways to homeownership, including LMI,” he says. “Mortgage brokers have a key role to play in bridging this gap and providing homebuyers with a clear explanation of what LMI is, who it protects and how it works.” By introducing LMI early in discussions, McAweeney says mortgage brokers can help homebuyers recognise its value and the opportunity it offers to make homeownership more accessible. To support mortgage brokers in conversations with first home buyers about how LMI could help them get into a home sooner, Helia has developed a specific suite of resources to inform and help them. This includes a range of information videos. The video series includes a What is LMI
He says brokers can also discuss with these clients whether LMI or a family guarantee is an option they would like to consider. Other topics brokers can talk to first home buyer customers about include the different types of home loan products available; variable and fixed interest rates; and repayment options (weekly, fortnightly, monthly). “While ING is not involved in any of the government schemes, brokers can direct FHBs to ING’s website where there is information specifically for FHBs that maybe useful,” says Gibson. The website can be accessed at ing.com. html, while the National Housing Finance and Investment website is also useful. MacRae says Bluestone appreciates that keeping track of the government’s various first
“Brokers can assist first home buyers by providing education on the homebuying process and helping them determine how much is needed to save for a deposit, stamp duty, conveyancing and moving fees” Glenn Gibson, ING video that helps homebuyers understand LMI, what it costs, who it protects and how it could support a homebuyer in purchasing a home with less than a 20% deposit. Helia’s Get Home Sooner video is aimed at homebuyers struggling to save a 20% deposit. “Feedback from mortgage brokers is that the videos help them support clients to understand the benefits of LMI and enhance customer discussions,” McAweeney says. Gibson says brokers can assist first home buyers by providing education on the homebuying process and helping them determine how much is needed to save for a deposit, stamp duty, conveyancing and moving fees.
home buyer schemes is challenging, given that first home buyers have no prior experience with lenders or the property market. “In our experience, brokers are best placed to assist first home buyers on their journey. We support brokers wherever possible by providing resources and conducting webinars specific to policy updates, relevant legislation and government assistance throughout the year,” he says.
First home buyer finance options To deliver more help to homebuyers, McAweeney says Helia offers a monthly LMI option, as well as its Deposit Comparison
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FEATURES
SECTOR FOCUS: FIRST HOME BUYERS
“We’re seeing first home buyers incentivised to leave the rental market and buy, due to rent increases and uncertainty around vacancies. First home buyers now account for 28% of owner-occupied properties” Tony MacRae, Bluestone Estimator, an award-winning resource to provide guidance around the potential benefits of different options for aspiring homebuyers with less than a 20% deposit. “We’ve also created Family Assistance, an offering for homebuyers who are seeking support from family members to purchase their home. Family Assistance provides a homebuyer with a 15% reduction when the cost of LMI is funded by a family member and paid up front at the time of loan settlement.” McAweeney says further information about LMI and Helia information resources are available at www.helia.com.au. Bluestone is dedicated to helping brokers serve first home buyers, MacRae says. It lends at up to 90% LVR with no LMI in a range of locations, which can save buyers thousands in upfront costs. “This includes owner-occupiers
and investor first home buyers, too. Customers can access cash-out on a loan of up to 90% LVR. First home buyers have access to our prime and near prime products – some risk fees may apply – making it easier for those who are self-employed or credit-impaired to get onto the property ladder.” Bluestone focuses on the customer, not their score, MacRae says. “We are flexible with the occupations and income we accept, including part-time and casual work, bonuses, overtime and government assistance. We also accept non-genuine savings – such as gifted funds – as a deposit, provided the customer demonstrates serviceability.” Brokers can call Bluestone’s Scenario Hotline on 13 BLUE and speak directly to a senior underwriter about a client’s unique situation, saving time and gaining deal
certainty over the phone before they submit a first home buyer’s application. MacRae says the non-bank has extended lending into Australian capital cities, except Darwin, and major regional areas. “With more locations, first home buyers have the best chance of finding the right property to live in or rent out.” Gibson says ING has three simple home loan products to choose from – the Fixed Rate Home Loan (one to five years); Mortgage Simplifier (no frills, no fees, includes redraw), and Orange Advantage (offset account, redraw and costs $299 p.a.). The bank also has competitive pricing and credit policies that can assist first home buyers. These include pre-approvals within two business days; LVR band pricing that allows for deposits of 5% or more; and family support, accepting parents, grandparents and siblings for security guarantees. Gibson says ING also allows customers to borrow up to 95% LVR (including LMI), and offers discounted LMI for first home buyers. “We inform brokers of the different FHB options available to customers by holding broker presentations at PD days and conferences; face-to-face meetings with ING BDMs; and webinars conducted by our BDMs.” Rakhit says brokers play an important role in understanding the lived experiences of Bankwest customers. “We recognise the vital role brokers play in
HOW CUSTOMERS VIEW MORTGAGE BROKERS’ SUPPORT
79%
78%
76%
72%
cut through complexity
provide value in the homebuying process
provide trusted advice and information
are trusted to support them in buying their first property Source: Helia Home Buyer Sentiment Report 2023
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SECTOR FOCUS: FIRST HOME BUYERS
simplified over 30 assessment standard operating procedures; co-created technology with brokers, such as DocBox; and launched ongoing improvements to the bank’s valuation and pricing tool to enable brokers to help more customers into a home.
MORTGAGE PAYMENTS AS SHARE OF INCOME IN AUSTRALIA 45% 40%
Road ahead for the sector
35% 30% 25% 20% 15% 10%
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2020 Source: PropTrack Housing Affordability Report, August 2023
“The Great Australian Dream remains very much alive for many aspiring homeowners, with 75% of Gen Z telling us that the goal of homeownership remains important to them – an 8% increase since 2021” Ian Rakhit, Bankwest helping everyday Australians navigate the complexities of this environment, supporting first home buyers to take that first step into homeownership,” Rakhit says. “In this everchanging market, we’ve remained committed to improving our service proposition, streamlining our processes and simplifying our product offering to meet the evolving needs of brokers and their customers.” Recognising the cost of living pressures on consumers and the need to simplify Bankwest’s offering for brokers, Rakhit says the Bankwest
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Simple Home Loan was launched this year – it has no application fees, which equates to a saving of $695. “We now have a product that can more clearly meet the needs of customers looking for a basic product with less fees and fuss – like first home buyers – and it includes no extra costs to redraw, the ability to make extra repayments at any time, and access to an optional 100% offset facility.” Rakhit says driven by the need to make life easier for customers and brokers, Bankwest
Buchanan says the RBA is likely looking for a soft landing as inflation pressures ease and GDP shrinks. “It’s likely that we have seen the peak and can probably look to a [cash] rate decrease sooner than expected. We anticipate more stock coming on to the market in the coming months that may slightly shift the market towards a buyers’ market, which may have some easing on prices.” However, as rates stabilise, this also increases buyer confidence across all markets, says Buchanan. While some investors are leaving the market for safe and reasonable bank deposit returns, a new market of investors will be looking to invest – this is “likely to keep prices lofty, thus not easing the burden of costs associated with entry”. “With big business asking staff to return to the office and keeping people close to the significant employment centres, I think that the status quo will be maintained into 2024,” he says. Gibson says that should interest rates materially decline, this may improve the borrowing capacity of first home buyers. “However, this may also drive further property price increases, creating further FHB headwinds, exacerbated if it’s in the absence of wage inflation.” Interest rate relief is always welcome, especially for first homeowners, MacRae says, but he agrees that a drop in interest rates could accelerate property prices, particularly in major capital cities. “With continued population growth, we see this as a real possibility. We encourage first home buyers to engage with their broker early into their savings journey and look for properties in affordable locations with good growth prospects.”
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SECTOR FOCUS: BROKER TECHNOLOGY
Time to join the digital revolution Mortgage brokers need access to the most efficient technology platforms to remain competitive, with automation and AI set to transform the industry “It’s simple for the client as they can do it when convenient, it saves time for the broker, and, importantly, it keeps personal information in a safe and secure environment as opposed to sharing via email,” he says. Russell, who has worked in the finance industry for 18 years, says he finds the use of BankStatements.com.au an absolute must due to the time it saves when collecting and analysing income and expense data. “Some customers are against entering their banking passwords; however, I find most customers are happy to use this service as it saves them time providing such information.”
What future platforms will have the greatest effect?
THE USE of digital technology is already changing the face of the mortgage broking industry, and automation and artificial intelligence are the next game changers. The pandemic accelerated the use of tech tools as brokers and their clients were thrown into communicating by Teams and Zoom, and electronic signatures became the norm. The pace of technological change has only increased. The Equifax Mortgage Broker Pulse Survey 2023 shows that, to improve the customer experience, 17% of brokers plan to adopt new digital solutions over the next 12 months, up 9% from the 2022 survey. A similar number – 16% (an 11% increase) – plan to adopt new digital solutions to automate processes.
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MPA asked Lendi Group chief product officer Travis Tyler and broker James Russell, a director at Kelly+Partners Finance, for their views on broking technology and how it can benefit the industry.
Vital technology for brokers now Tyler leads Lendi Group’s ‘Experience Org’, which oversees the company’s technology, growth and products teams as well as the ongoing maintenance, optimisation and enhancement of its proprietary Platform. He has more than 20 years’ experience in financial services, covering product, marketing, design, technology and operations. Tyler says brokers should offer clients the ability to share and upload documents securely.
Tyler says it’s likely that the biggest impact is yet to come with the rise of generative AI. “The pace and impact of the change is likely to be bigger and faster than the internet and will be pervasive in all industries. We are already seeing it across many industries with the cutting down of the time it takes to complete tasks or the elimination of manual tasks altogether.” Tyler says Lendi Group sees its proprietary platform as offering brokers an opportunity to further increase their productivity, improve customer experiences, access richer and more personalised information throughout the application process, and be able to answer almost any question in real time – allowing them more time to focus on clients’ needs. Russell says the mortgage broking industry is likely to move towards fully digital processes.
“This includes online application submissions, document uploads and electronic signatures, streamlining the mortgage application and approval process. “Lenders were quick to implement features such as electronic signatures during COVID, using e-sign platforms such as DocuSign and Adobe, which has had a huge impact on the ability of borrowers to sign and return loan documentation in a quick and reliable process.”
Lendi Group’s Platform Tyler says the core benefit of Platform, which is used by all Lendi Group brokers, is live
“Platform gives our brokers the ability to make compliance a competitive advantage through our technology-driven ‘codified compliance’,” Tyler says. The system also improves broker and network operating efficiency by reducing manual processing. Tyler says the efficiencies mean significant cost and revenue synergies and reinvestment in the future growth of the group. Russell says improving technology processes for post-settlement services is crucial for lenders to enhance efficiency, reduce costs and provide better broker and customer outcomes.
“Platform’s digitisation of the application process makes the experience more seamless for brokers and customers, allowing for significantly faster lodgement speed compared to industry averages” Travis Tyler, Lendi Group connectivity. “Platform’s dual interface allows the broker and customer to work through the search, fact-find and application process together – in real time,” he explains. Traditionally, brokers rely on offline processes, says Tyler, with the average loan taking more than 20 hours to process and customers facing weeks of uncertainty. “Platform’s digitisation of the application process makes the experience more seamless for brokers and customers, allowing for significantly faster lodgement speed compared to industry averages.” Tyler says the proprietary technology has revolutionary features that power Lendi Group’s fully supported broker model and enable brokers to work more closely with customers and lenders to really deepen those relationships.
“Developing user-friendly self-service portals for brokers to access their loan book data, monitor and reprice interest rates and complete service requests will not only
reduce the burden on lender support teams but enhance overall broker and customer satisfaction.”
AI and automation Russell says AI has the potential to significantly enhance the efficiency and effectiveness of brokers in several ways, including through data analysis, document verification, fraud detection and workflow automation. “However, AI is a double-edged sword as, in time, big tech will be able to fully automate the broking process that may push out human interactions as we know them today.” Tyler says one of Lendi Group’s core values is “keeping home loans human”. “Mortgage broking is a people-centric industry,” he says. “We use technology to facilitate stronger engagement and deeper connections between brokers and customers, ultimately enabling brokers to deliver faster, better outcomes – and we will continue to do that.” The group has more 600 team members supporting broker businesses, and over 1,300 brokers servicing thousands of customers, and “our approach is always human-led and tech-superpowered, so for us, technology enables rather than replaces the human connection”, Tyler says. “From a customer’s perspective, access and speed to information will be a game changer, and we’re already looking at how that can play into our Platform to make it even more effective.” For brokers, Tyler says quicker responsive-
THE PACE OF DIGITISATION IS ACCELERATING
17% of brokers expect to adopt new digital solutions to improve the customer experience. Up from 9% in 2022.
16% of brokers expect to adopt new digital solutions to automate processes. Up from 11% in 2022. Source: Equifax Mortgage Broker Pulse Survey 2023
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SECTOR FOCUS: BROKER TECHNOLOGY
TOP 3 WAYS BROKERS ARE INCREASING EFFICIENCY OF PROCESSES
29%
Using aggregator resource hubs
27%
Collecting financial and credit information from various sources
21%
Using new digital or AI tools like ID verification & affordability assessment Source: Equifax Mortgage Broker Pulse Survey 2023
“Improving technology processes for post-settlement services is crucial for lenders to enhance efficiency, reduce costs and provide better broker and customer outcomes” James Russell, Kelly+Partners Finance ness, automation and connection with lenders is where there’s potential for impact. “Our Approval Confidence technology is already the first of its kind. It integrates directly with lender decision engines to give customers a real-time indication of the likelihood of unconditional approval.” As a thought leader in the industry, Tyler says Lendi Group is home to hundreds of talented, creative people who are experts in their field. This was on full display at the group’s inaugural two-day Hackathon in April, where brokers and team members from all business units formed small groups to ideate and create prototypes to improve broker and customer experiences, with AI and automation at the core. “The incredible creative outputs from this event are now being reviewed at a business level to consider how they can be honed and implemented, with three products already in build phase – watch this space.”
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Direct-to-customer digital loans Russell says digital loans eliminate the need for mortgage brokers. “Borrowers can apply for loans directly through these platforms, bypassing brokers altogether. This could lead to a reduction in the demand for mortgage broker services.” But Russell says it’s important to note that the broking industry still has advantages such as providing personalised advice, navigating complex mortgage options and offering a human touch during the homebuying process. “Some borrowers may still prefer working with mortgage brokers for their expertise and guidance,” Russell says. Tyler says there’s a small group of customers who prefer digital loans, but it will remain small as many clients need help to navigate an increasingly complex mortgage system, or tailored solutions to meet their unique needs.
“Brokers play a much broader role than just finding and settling the right loan. We provide support throughout the property journey, and we are one of the most trusted as our interests are aligned with the client,” Tyler says. “Having someone on your side to get the right rate or find the right solution so you can get that extra bedroom has never been more important.”
The future Tyler says broking will continue to be a relationship business, but those who embrace tech throughout their journey will provide the quality experience customers expect when making the most important purchases of their lives. “All experiences will be connected and smart. The days of tiresome manual processes are limited, and Lendi Group is already making these obsolete for brokers and customers alike.” Processes that exist today will become automated, so service will become a more important factor when it comes to standing out from the crowd, says Tyler. Russell says the industry is increasingly moving toward digital platforms, online services and big data. “Borrowers can now apply for mortgages, upload documents and communicate with brokers through web and mobile applications. This trend is likely to continue with even more streamlined and user-friendly interfaces.” Brokers are increasingly relying on data analytics and AI for insights into customer behaviour, market trends and credit assessment, Russell adds. Advanced analytics tools will help brokers identify potential clients, optimise marketing and allow for more informed decision-making. Russell says it’s important to keep in mind that broking is subject to regulatory changes and market dynamics that can influence the adoption of technology. “Brokers who can adapt to these changes and leverage technology effectively are likely to remain competitive.”
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BROKERAGE INSIGHT
Holistic approach drives growth Indigo Finance founder Melanie Cunliffe realised early on that the relationship of a broker with their customer was more than just transactional. She has built her brokerage on fostering great long-term partnerships with clients
MELANIE CUNLIFFE is a great example of how passion and persistence in the mortgage industry pays off. The founder and owner of Sydney brokerage Indigo Finance, Cunliffe got her start in the broking industry 17 years ago, shortly after arriving in Sydney from the UK. With a background in marketing, she joined mortgage management company
“I became really passionate about seeing how we could add value for clients by understanding our client’s relationship with money, and how we could best help them to leverage finance in order to achieve their goals.” Brimming with ideas, Cunliffe says her boss and mentor encouraged her to start her own business. “He was so supportive and said, ‘you can do this’. ”
“Customer experience is at the heart of everything we do, and that’s kind of the litmus test of every decision we make in the business” Capital Trust as a marketing coordinator. “They had about 35 franchisees, and I would help the franchisees with their marketing,” Cunliffe says. In this role she gained a good understanding of how the business operated. This was during the GFC, when clients were struggling with high interest rates and were unable to refinance. “It was a really interesting space for me exposure-wise to see that, and it was all hands on deck in trying to help these clients essentially find new homes for their mortgages.” Cunliffe says brokers would focus on interest rates and say to clients, ‘we’ve got these three products – which one would you like?’
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Cunliffe says the market had a certain perception about mortgage brokers and her goal in setting up Indigo Finance in 2011 was to challenge that perception. “I wanted to show them it wasn’t just about products and brokering a transaction
– you could truly add holistic advice. It was about saying, ‘we’re here and we’re going to partner with you and support and deliver advice to you for the longer term’. ” Starting with just one assistant, Cunliffe now has 13 staff, including three brokers. She admits she has at times found it challenging that she’s gone from being the sole broker to having a team and trying to juggle the priorities of both clients and the team. “But it’s also been a great growth opportunity. I’ve had to challenge myself and invest in myself – learning new skills as a manager. I’ve done a lot of work so that I can grow to be a better leader.’ The brokerage focuses on residential lending but also offers commercial finance and has plenty of self-employed clients. Cunliffe refers to these customers as “boho” (business owner, homeowner). She recognises that the finances of self-employed clients can be complex and that understanding the business is key as their finance needs evolve.
BUILDING HOPE “We are passionate about learning and growth within the team and also giving back to the world in a way that creates these opportunities for others. We partner with a charity called BIG1 to make an impact, and for every loan settled and for special milestones in the business we provide bricks to help build a ‘classroom of hope’ from recycled plastic waste in Indonesia. This is one of the impacts causes we are presently supporting and that are chosen by the team.” – Melanie Cunliffe, Indigo Finance
INDIGO FINANCE AT A GLANCE Owner: Melanie Cunliffe Location: Sydney, NSW (servicing clients both in Australia and overseas) Services: Residential and commercial mortgage broking Number of employees: 13
Group CEO at FINSTREET Boban Jurisic and co-founder and chief strategy officer Darren Liu
Indigo Finance is a 100% referral-based brokerage. Existing clients make up about two-thirds of the business, and the rest come from the brokerage’s strategic referral partners, such as accountants, financial planners and buyers’ agents. “We work actively with the partners and businesses in our network to share our knowledge,” says Cunliffe. “We have always been passionate about working with and educating the small business community.” While the typical client can vary, they are often a time-poor professional who wants an expert to help them with their finance needs. “They want to be strategic about their goals; a lot of them are very entrepreneurial.” Owner-occupier loans are on the rise, Cunliffe says. “Now that rates have settled,
we’re seeing people getting a bit more comfortable, saying ‘I’m going to buy that home, or upgrade’. We’re seeing a lot of clients selling and buying.” The other active sector is self-managed retirees who might own land and are building or renovating property. “We can provide our expertise to help those people, who might have more complex and sophisticated finance needs.” Indigo Finance is about to surpass $1bn in loans. Cunliffe says a key focus is maintaining quality and consistency through growth, maintaining service levels. She says the business is growing due to the customer experience and by investing in the team. “I’m very passionate about delivering customer experience. That’s what drew me to
the industry, and now that’s translated into a passion for empowerment – empowerment of our clients and also of the team. “Customer experience is at the heart of everything we do, and that’s kind of the litmus test of every decision we make in the business.” Cunliffe says it’s about more than service; it’s about other ways to add value for clients. Key actions include ‘knowing your stuff ’ and ‘investing in yourself ’. Each staff member has a learning and development plan to help them not just improve their skills but also become better human beings. “I believe that if we’re the best version of ourselves in life, then we’re going to be able to show the best version of ourselves in the workplace too.” Cunliffe says the brokerage also focuses on valuing processes. “I love this quote by [author and entrepreneur] Gino Wickman: ‘Systemise the predictable so you can humanise the exceptional’. “We avidly track and measure stats such as days processing, missing information requests, rework, etc, so that we can minimise these things. Being on point with quality is part of our culture, and we celebrate it as a business.” When it comes to Indigo Finance’s point of difference, Cunliffe says it’s all about having an impact on clients’ lives. “If we can reduce their stress just a little bit, our clients are going to remember us forever.”
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OTHER LIFE
TELL US ABOUT YOUR OTHER LIFE Email antony.field@keymedia.com
“In breeding Angus cattle, we have the goal to improve the herd’s genetics. This is truly challenging a nd very rewa rding”
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Number of cows in Anthony McDonald’s herd
9mths Gestation period of a cow
75L
Amount of water a cow can drink per day
600kg Average weight of a cow
BROKER MCDONALD HAS A FARM
The lessons learnt from raising cattle have helped make Port Finance director Anthony McDonald a better broker GROWING UP on a cattle farm taught Anthony McDonald the strong work ethic and resilience that assisted his move into mortgage broking more than 20 years ago. McDonald, the director of Melbournebased Port Finance, now finds great enjoyment and satisfaction in raising his 60 Angus cows.
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“It’s a true distraction from mortgage broking, and I often find myself watching and listening to the herd munching on grass when moved into a fresh paddock,” he says. “There isn’t a better sound than a happy cow eating!” Calving time, which occurs each spring, is a busy time of year for McDonald.
“Cows need to be checked twice a day to ensure everything is OK,” he says. “There is nothing more exciting than heading up the paddock and being greeted by a brand-new baby or two getting a drink from its mum.” McDonald says they nickname their bulls, and currently Big Baz is the main man in town.
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