CELEBRATING 20 YEARS
MPAMAGAZINE.COM.AU ISSUE 21.06
EMPOWERING BROKERS
Aggregators come together to discuss the big issues faced by the broker community TOP BROKERAGES The annual ranking is back and bigger than ever
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ALT-DOC LENDING Overcoming the obstacles COVID created for borrowers
REFINANCING PROPERTY Multiple options for investors with multiple properties
01/06/2021 8:13:52 am
Tech for your tomorrow. Introducing CRM, part of Suite360. The ultimate digital workspace for tomorrow’s broker. Save time, manage a better business and give your customers the experience they demand. Book a demo today.
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JUNE 2021
CONNECT WITH US
CONTENTS
Got a story or suggestion, or just want to find out some more information? twitter.com/MPA_Australia facebook.com/Mortgage ProfessionalAU
UPFRONT 02 Editorial
30
14
FEATURES
ALT-DOC LENDING SOLUTIONS Specialist lenders highlight the growing popularity of this offering in changing times
The uptake of technology by brokers has been crucial to success, but it needs to maintain momentum
04 Statistics
Australia's capital city dwelling prices have grown by more than 400% over the last 30 years
06 News analysis
The Federal Budget's extensions to successful incentives offer new hope to Aussies looking to get into homes
08 Opinion
Where new opportunities lie for brokers in the refinancing market
FEATURES
AGGREGATORS ROUNDTABLE Six aggregator groups gather to discuss what they’re doing to advocate for and support brokers, and the opportunities that are there for the taking
BIG INTERVIEW
LEIGH HOOLEY
Liberty’s new group manager – business capital talks about the non-bank’s support for Australian small businesses seeking finance
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PEOPLE
40
FEATURES
REFINANCING A PROPERTY PORTFOLIO
54 Brokerage insight
The Mortgage Choice broker who loves her job so much she is taking on a second franchise
56 Other life
A dad of two, this Liberty Network Services broker loves encouraging young people to stay fit
Three lenders discuss how brokers can help customers refinance multiple investment properties
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SPECIAL REPORT
TOP BROKERAGES Find out who made it into this year’s bumper list of Australia’s top brokerages, overcoming all the challenges of COVID-19
MPAMAGAZINE.COM.AU NOW ONLINE: Our daily newsletter. Keep on top of property market trends, business strategy, and what industry leaders have to say.
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31/05/2021 4:36:43 pm
UPFRONT
EDITOR’S LETTER www.mpamagazine.com.au
Embrace digital tools of the future
O
ne huge positive that has come out of the COVID-19 pandemic is the rapid rise in the use of technology. Banks were forced to implement new tools and allow for the e-signing of documents, and brokers who had resisted virtual meetings and electronic documents had no choice but to adapt. According to the aggregators MPA spoke to this month as part of our annual roundtable (page 14), the proportion of brokers using their systems shot up in 2020. Unfortunately, as restrictions have eased across the country and people are meeting face-to-face again, the figures have begun dropping. While technology might not be for everyone, the benefits of embracing it are clear, and the aggregators are keen to sustain those higher numbers. Technology has allowed brokers and BDMs to speak to more people than usual; with time no longer spent on travelling between face-to-face appointments they can fit more conversations in throughout the day. It has also helped brokers with regional customers who are able to get everything signed and uploaded without a long drive.
It was interesting to learn of the dropping numbers of brokers using aggregator tools when there are such clear benefits Systems are also in place for brokers to upload loan documents and keep track of their customers’ applications, as well as send out marketing communications and reminders to clients. It was interesting to learn of the dropping numbers of brokers using aggregator tools when there are such clear benefits. As Nectar Broker Brands business manager Andrew Stevens recently told MPA Online, the future belongs to businesses that use technology. He points out three specific ways it can help brokers: in building a personal brand, creating accessibility, and enhancing their service offering. “The threat is that you become too difficult to deal with, and clicking a single button elsewhere becomes more appealing. Embrace the tech and automation that can give your customer the answer to their question at the point of consideration,” Stevens said. No doubt everyone can agree that technology is here to stay. This does not mean customers will go online instead for their home loans, but it does mean brokers have an incredible opportunity to provide a convenient and intelligent offering alongside the personalised customer experience that 60% of Australian home loan borrowers already choose. Rebecca Pike, editor, MPA
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JUNE 2021 EDITORIAL
SALES & MARKETING
Editor Rebecca Pike
National Sales Manager Claire Tan
Contributor Daniel Carde
Global Head of Media Marketing Lisa Narroway
Production Editor Roslyn Meredith
ART & PRODUCTION Designers Cess Rodriguez, Juan Ramos Traffic Coordinator Kristine Jamir
CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil
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Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as the magazine can accept no responsibility for loss.
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1300 303 382 specialistfinancegroup.com.au Australian Credit Licence No. 387025
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UPFRONT
STATISTICS LENGTHY LOAN APPROVALS A TOP CONCERN
$900,000
$700,000
75%
of brokers believe turnaround times have worsened
$500,000
PROPERTY PRICES THREE DECADES ON
Capital city
1990
2020
Sydney
$180,014
$870,583
Melbourne
$141,160
$700,230
Brisbane
$151,259
$523,200
Adelaide
$170,814
$470,831
A study of property prices over the last 30 years has shown that the average price of a dwelling (apartments and houses) has risen by more than 400%. In line with this increase, the average mortgage value has grown from $36,262 to $473,609.
Perth
$143,867
$467,890
Hobart
$120,980
$514,864
National dwelling values over three decades
Avg $207,823
Avg $141,468 $300,000
86%
of brokers say their biggest concern is turnaround times
1990
$100,000
2000 2000
1995 46.9%
RISE IN FIRST-HOME SALES PUSHES LVRS UP Coinciding with the uptick in first home buyers, the share of high-LVR lending is also increasing, despite a drop-off after the onset of COVID-19.
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days is slowest turnaround time by major bank
TREND IN HIGH-LVR LOANS COMPARED TO FIRST-HOME PURCHASES >80% LVR loans as a % of new lending
First home owner housing finance commitments (right scale)
41%
$6,000m
Growth in FHB lending is increasing. FHBs often have smaller deposits, translating to higher-LVR loans
40%
$5,000m
39%
$4,000m
38%
65%
of brokers believe lenders and BDMs should work more closely with them Source: MyState Quarterly Broker Survey
$3,000m
37%
High-LVR lending dropped off after the onset of COVID-19 when uncertainty was high but has increased since mid-2020
36% 35% 34%
Mar 2019
Apr 2019
May 2019
Jun 2019
Jul 2019
Aug 2019
Sept 2019
Oct 2019
Nov 2019
Dec 2019
Jan 2020
Feb 2020
Mar 2020
Apr 2020
May 2020
Jun 2020
Jul 2020
Aug 2020
$2,000m $1,000m Sept 2020
$0m
Source: S&P Global Ratings
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NATIONAL/CAPITAL CITY DWELLING VALUES 1990–2020
WHETHER TO BUY OR TO RENT Avg $581,806
A new report shows that in Tasmania, NT and the ACT, 100% of units are cheaper to buy than rent; in Queensland, SA and WA they are 98% cheaper.
% OF ALL DWELLINGS (HOUSES AND UNITS) THAT ARE CHEAPER TO BUY THAN RENT
Avg $432,842
Australia
56.8%
Northern Territory
Queensland
Tasmania
Western Australia
99.1%
89.2%
85.0% 2005 2005 108.3%
2010
2015 34.4%
2020
78.8%
ME’s latest research shows that household financial comfort is at its highest level since the bank began surveying customers. % of households taking these steps to ease financial burden during COVID-19
CONSUMER SENTIMENT INDEX, APRIL 2005–APRIL 2021
90
80
80 70 Apr 13
Apr 17
Apr 21 Source: Westpac Consumer Sentiment Index
6% 4% 2% 0%
5.49
7% 4.71
4.45
5.81
5.46
9%
6%
3.42
4.79
4.33 3%
2%
2%
1% Took out loan for business
90
11%
Took out personal loan (eg overdraft)
100
10% 8%
7.50 7.00 6.50 6.00 5.50 5.00
Requested a rent reduction
110
Used JobSeeker payments
110
Delayed payments or did not pay bills (eg utilities)
120
7.60 8.00
Withdrew from superannuation
120
Current index of financial comfort (scores out of 10) of households that took these steps
18% 16% 14% 14% 12%
Used JobKeeper payments
130
Dipped into savings
130
Apr 09
34.7%
Source: REA Insights Buy or Rent Report
Deferred payments on existing loans (eg home loan, personal loan, etc.)
Consumer sentiment is at its highest since 2010, up 57% in the year to April 2021. Recreational services and hospitality staff showed particularly big gains.
Apr 05
Victoria
39.3%
HIGH FINANCIAL COMFORT
CONFIDENCE SKYROCKETS
70
79.8%
Aus Capital Territory New South Wales
Source: Aussie; CoreLogic
100
South Australia
81.0%
Source: ME Household Financial Comfort Report
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4.50 4.00 3.00
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01/06/2021 8:07:59 am
UPFRONT
NEWS ANALYSIS
Budget 2021: A boost for homebuyers ‘A new opportunity to shine’ for brokers. That was how the FBAA’s Peter White described the Federal Budget released in May, which announced more support for Australians looking to get into housing THE FEDERAL GOVERNMENT released its 2021 budget in May, and the finance industry largely supported the measures introduced. FBAA managing director Peter White said the budget would give brokers “a new opportunity to shine”. Off the back of the successful rollout of the First Home Loan Deposit Scheme in 2020, Treasurer Josh Frydenberg announced that the scheme would be expanded, allowing an additional 10,000 buyers to purchase a house with a 5% deposit. Up to 10,000 single parents will also be able to purchase a house through the scheme with a deposit of as little as 2%. A joint announcement by the Treasurer, the Minister for Families and Social Services and Minister for Women’s Safety Senator Anne Ruston, and Assistant Treasurer and Minister for Housing Michael Sukkar said the additional measures followed the success of the HomeBuilder grant which saw more than 120,000 Australians apply. It added: “The Government understands the importance of owning your own home and the significant economic and social benefits homeownership provides. Supporting more Australians to own their own home is part of the Government’s economic plan to secure Australia’s recovery.” But White said the “devil is in the detail”;
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incentives like these were not always as simple as they first appeared, and this was where brokers could provide clarity and support. “Only finance brokers understand the market and the programs intimately, therefore it’s essential that as soon as the details are known and rolled out, we educate ourselves on every aspect, including eligibility requirements and processes,” he said. The government has also extended the downsizer superannuation scheme to those aged between 60 and 65. Australians aged
move out of their oversized family homes, which would in turn help second home buyers who were currently hindered by those baby boomers in capital city markets with no incentive to move. Raine had previously called on state governments to consider stamp duty tax
“This announcement by the Treasurer means more boomers can confidently take the plunge into downsizing in a tax-effective manner that will enhance their retirement savings” Angus Raine, Raine & Horne 60-plus who have lived in their current home for at least 10 years can now sell up and scale down to a more manageable property and use some of the sale proceeds to make a downsizer super contribution. Previously, this benefit was only available to those aged 65-plus. Raine & Horne executive chairman Angus Raine said this would help empty nesters
breaks for empty nesters which would reduce the costs of downsizing and get turnover stock moving. “This announcement by the Treasurer means more boomers can confidently take the plunge into downsizing in a tax-effective manner that will enhance their retirement savings,” Raine said. “It will also increase
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HOMEBUILDER GRANT BRINGS BIG BENEFITS
>$30bn worth of residential construction activity expected to be supported by the HomeBuilder grant
14, 117 houses approved in March 2021 as HomeBuilder drives private sector house approvals to the highest level on record
120,000+ applications have been received for the HomeBuilder grant
Source: budget.gov.au
the turnover of stock and help improve housing affordability for families and first home buyers.” It was not just the Liberal government outlining support for housing as part of the budget. The Opposition also announced its
Labor Party budgets, Lendi Group CEO David Hyman said there had been plenty of discussion about the impact of the pandemic on first home buyers and housing affordability, so it was positive to see the two sides committed to supporting affordable housing.
“Only finance brokers understand the market and the programs intimately, therefore it’s essential that as soon as the details are known and rolled out, we educate ourselves” Peter White, FBAA policies in response, revealing plans to create a $10bn Housing Australia Future Fund. The annual investment return would “build social and affordable housing and create thousands of jobs”; the first five years would see 20,000 social housing properties and 10,000 affordable housing properties for frontline workers. Commenting on both the Liberal Party and
He added that with international borders expected to remain closed well into next year, incentives designed specifically to support the purchase and construction of new dwellings had already been effective in funnelling demand into construction and job creation. “Importantly, the median property price in major capital cities is firing up partially due
to the shortage of supply, so some of these government measures are targeted at diverting first home buyer demand into newly established property, potentially insulating the established market from additional price increases,” Hyman said. “Speaking to a broker has never been as important for consumers to be able to realise the opportunities being proposed under Budget 2021–22.” As brokers take advantage of the opportunities created by the budget, White reminds them that they have a responsibility to make sure that borrowers are really prepared for the bigger picture. “Brokers also have a responsibility to adhere to the best interests duty and responsible lending guidelines, and we must ensure that borrowers are prepared for when interest rates rise,” he said. “In markets such as this, home prices are increasing, and with deposits of only 2%, it won’t take much of a drop in property values to create situations of negative equity, and this will affect those who can afford it least.”
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31/05/2021 12:19:56 pm
UPFRONT
OPINION
GOT AN OPINION THAT COUNTS? Email rebecca.pike@keymedia.com
Refinance benefits for all While refinancing boomed in 2020, many mortgage holders have not considered it or are putting it off. This is good news for brokers, says Resimac’s Daniel Carde ONE OF the perils of working in an industry like home loans is that it’s easy to get caught in an echo chamber. Take refinancing for instance. With the lion’s share of applications coming through being for refinances, it’s natural for those in our industry to assume that every borrower starts thinking about refinancing once they’ve been on the same loan for a couple of years. It turns out that’s not the case. Resimac recently commissioned research that polled 1,063 Australians who’d had a mortgage for at least two years, and the insights were unexpected. One of the most surprising was that one in three had never refinanced their home loan. Unpacking the data further, it showed that an additional one in 10 Australian mortgage holders hadn’t refinanced their home loan for the last five years, despite interest rates being on a steady decline throughout that period. So, why aren’t these borrowers refinancing despite the obvious benefits? Interestingly, we found the main cause was simply that mortgage holders hadn’t considered it. To reiterate, the reason why more than a third (35%) of Australian mortgage holders hadn’t refinanced their home loan was that it just hadn’t crossed their mind. Apathy was also a dominant factor, with 27% saying they hadn’t got around to it, couldn’t be bothered, or found it too complicated. These survey results are good news for mortgage brokers and represent a fantastic opportunity. As the frontline of the mortgage industry and the trusted partners of borrowers, brokers bring skills and expertise to the table that can go a long way towards helping educate clients and managing the process on their behalf so that they don’t relegate it to the ‘too hard’ basket. Put simply, mortgage brokers
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provide both choice and convenience when it comes to one of the biggest financial commitments most Australians will ever make. Certainly, some borrowers may not relish having to go through a similar process to what they went through with their home loan originally, but the financial benefits can help break through that initial apathy. Our research found that the average amount our respondents saved on their monthly repayments was $405, which equates to nearly $5,000 a year. Further, 21% of respondents were saving over $500 or more on their monthly repayments.
aware or were unsure about this as an option. More than half the mortgage holders we surveyed had identifiable debts when they took out their current home loan, the most common being credit card debts (39%), followed by car loans (13%), personal loans (10%), and ‘buy now, pay later’ services such as Afterpay and ZipPay (9%). By consolidating these debts when refinancing their mortgage, a customer could save well over the average of $5,000 per year saved on just refinancing a property. For those with sufficient equity in their property, getting cash out to do some minor
The reason why more than a third of mortgage holders hadn’t refinanced their loan was that it just hadn’t crossed their mind And what were borrowers doing with the additional cash they had freed up in their household budget? If you guessed it was going on (domestic) holidays and buying TVs and other tech, you would be right, but only for the minority (8% and 7% respectively). Most respondents reported the admirable financial responsibility of customers in managing the saved funds, with almost half (49%) putting the money back into their mortgage, 25% using it to pay bills and other debts, and 20% saving the money in an emergency fund. Having more money left over in the monthly budget is an obvious drawcard, but there may be other reasons to refinance that could resonate more deeply with certain customers. Debt consolidation is one of those lesser-known perks of refinancing, and this was backed up by our research, which found that almost a third of mortgage holders (31%) were not
renovations around the home, freeing up some capital to buy an investment property or help adult kids onto the property ladder could also appeal to particular customers. While refinancing continues to drive the majority of home loan applications, there’s still an untapped market for brokers, with a third of Aussie mortgage holders overlooking the opportunity to save an average of nearly $5,000 annually. In this post-COVID climate, any opportunity to save money and get ahead of debt is likely to be looked on favourably, and brokers are in a prime position to be having those conversations with their clients.
Daniel Carde is the general manager, distribution, at Resimac
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Connective Broker Services Pty Ltd ACN 161 731 111 CRN 437202 Authorised under Australian Credit License Number 389328
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31/05/2021 12:21:12 pm
PEOPLE
BIG INTERVIEW
LEIGH HOOLEY: NEW RECRUIT WITH A FOCUS ON SMES Off the back of successful government schemes to support recovering Australian businesses, Liberty has welcomed a new group manager – business capital to oversee its business lending initiative
HELPING BUSINESSES across Australia stay in operation as they dealt with the impacts of the pandemic, the SME Guarantee Scheme provided access to vital funding. Building on the success of the scheme, the government is extending support for small businesses that were adversely affected by COVID-19 or the floods of March 2021
support its brokers and business partners. After more than 20 years in the finance industry, with the last 14 in roles at banks, Leigh Hooley has joined Liberty as its group manager – business capital. Acknowledging the essential part that the scheme has so far played in helping businesses keep their doors open, Hooley says
“Liberty will continue to treat every application with priority so we can provide businesses with the funding they need as quickly as possible” with the SME Recovery Loan Scheme. Liberty was recently accepted into this second phase of the program after being one of the first non-banks to sign up to the initial SME Guarantee Scheme. As part of its commitment to providing tailored solutions to help customers in difficult circumstances, the group has established a dedicated business lending department to further
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Liberty is proud to have supported business growth and recovery. “This is a difficult time for many Australians, and having the right financial support available is critical,” he says. “These schemes have responded to the need for more businesses to access capital, and Liberty is here to deliver. Being part of this program is another example of how
Liberty is continuing to help customers rebuild and grow from these challenging times. We will continue to treat every application with priority so we can provide businesses with the funding they need as quickly as possible.”
Growing appeal of low-doc loans Now more than ever, businesses are seeking flexible solutions. Liberty has seen a rise in the number of borrowers needing alt-doc or low-doc loans, particularly business owners, the self-employed and sole traders. Hooley says low-doc loans “can open up a world of opportunity” for business owners who want to grow their businesses, whether by rebuilding, changing direction, diversifying or expanding. As more customers become aware of these loan options, Hooley expects them to increase in popularity, and says brokers are well positioned to capture the demand and diversify accordingly. “At Liberty, our mission is to help more people get and stay financial – and specialist lending plays an important role in that,” he
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PROFILE Name: Leigh Hooley Title: Group manager – business capital Company: Liberty Years in the industry: 20+ Career highlight: “The satisfaction of seeing the businesses you have supported grow and flourish” Personal motto: “People may forget what you said and did, but people will never forget how you made them feel” Career goal: “I’ve entered this new role with the goal of further strengthening Liberty’s reputation as a genuine supporter of Australian businesses”
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PEOPLE
BIG INTERVIEW
says. “There is no one-size-fits-all approach to this, but it’s about understanding their needs and being willing to go the extra mile to secure a great customer outcome.” The non-bank works closely with brokers to ensure they can provide the kind of support Liberty’s customers are looking for, especially in the current climate. When mortgage brokers provide an option such as low-doc lending, the core values remain the same, says Hooley. He explains that providing a personalised service is essential, as is taking the time to closely understand borrowers and their goals. “In doing so, brokers can help customers explore their options and the benefits that a low-doc loan may bring them,” he says.
we are continuing to expand our product offerings to support even more business customers than ever before,” he says. “I look forward to playing my part in reinforcing the strong reputation that Liberty has established. “For more than 23 years, Liberty has prided itself on its flexibility to help borrowers in a variety of different circumstances. I’ve observed the growth of the company and its diversification to become a true leader in nonbank solutions.” The original Coronavirus SME Guarantee Scheme provided up to $40bn in lending to SMEs by guaranteeing 50% of new loans through participating lenders. It was extended to a second phase, which began on 1 October
“We’ll continue to work alongside our brokers to ensure they adapt and remain innovative to serve evolving customer needs” Helping mortgage brokers diversify their offering will continue to be a priority for Liberty in the foreseeable future. “More borrowers now recognise the benefits of working with a broker, and there’s greater awareness of the different services they can provide,” he says. “We’ll continue to work alongside our brokers to ensure they adapt and remain innovative to serve evolving customer needs.”
Keeping flexible options a priority With respect to other priorities of the nonbank over the next 12 months, Hooley says the more it can help business owners, the better it can help the economy and communities across Australia. Understanding that “not everyone fits in the same box” and customers need flexible options, Liberty will be focusing on continuing to deliver a high standard of service. “I’m excited to join Liberty at a time when
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2020 and is available until 30 June 2021. Liberty continues to support eligible customers through this scheme with a competitive suite of business lending products, including both secured and unsecured options. Meanwhile, through its participation in the SME Recovery Scheme, businesses that received JobKeeper payments between 4 January 2021 and 28 March 2021 or floodaffected businesses in eligible localities will be able to access greater funding to recover and invest for the future. Under the non-bank’s revised Liberty Business Care offering, businesses can apply for variable rates starting from 3.45% per annum, with increased loan limits of up to $5m and loan terms of up to 10 years. There is also the option to defer repayments for six or 12 months with accrued interest capitalised. Existing SME Guarantee Scheme loans and other eligible debts can be refinanced under the scheme.
KEY FEATURES OF SME RECOVERY LOAN SCHEME Participating lenders are offering guaranteed loans on the following terms under the government’s SME Recovery Loan Scheme:
• The government guarantee will be 80% of the loan amount. • Lenders are allowed to offer borrowers a repayment holiday of up to 24 months. • Loans can be used for a broad range of business purposes, including to support investment. Loans may be used to refinance any pre-existing debt of an eligible borrower, including those from the SME Guarantee Scheme. • Borrowers can access up to $5m in total, in addition to the Phase 1 and Phase 2 loan limits. • Loans are for terms of up to 10 years, with an optional repayment holiday period. • Loans can be either unsecured or secured (excluding residential property). • The interest rate on loans will be determined by lenders but will be capped at around 7.5%, with some flexibility for interest rates on variable rate loans to increase if market interest rates rise over time.
M b S © A
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Australians love their brokers. And so does ANZ. That’s why we go the extra mile when it comes to giving you support. Our customer-facing ads highlight the importance of brokers by reminding Australians they can speak directly to you, for their home loan needs. And to ensure you get the support you need when you need it, our team of dedicated ANZ BDMs are ready to work with you. ANZ is the bank that sees Brokers as partners. And that all adds up to better support for your customers.
ANZ Financial Wellbeing MFAA Quarterly Survey of Brokers (September 2020), page 10, brokers’ market share of all new residential loan settlements during September 2020 quarter grew to highest share on record at 60.1% © Australia and New Zealand Banking Group Limited (ANZ) 2021 ABN 11 005 357 522. Australian credit licence number 234527.
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31/05/2021 12:33:36 pm
FEATURES
AGGREGATORS ROUNDTABLE 2021
SAILING THROUGH UNCHARTED WATERS
THE AGGREGATORS ROUNDTABLE returned in 2021 as an in-person event after being held virtually last year. Joined by six aggregators and two mortgage brokers, MPA asked some of the biggest questions on brokers’ lips, including those sent in by brokers themselves. Taking place at the iconic Café Sydney, the roundtable featured Brendan O’Donnell from Liberty Network Services, Susan Mitchell
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from Mortgage Choice, Mark Haron from Connective, Chris Slater from AFG, Blake Buchanan from Specialist Finance Group, and Tanya Sale from outsource Financial. They were joined by mortgage brokers Bernadette Christie-David from Atelier Wealth and David August from Initial Finance. Aggregators worked incredibly hard over the last year as the pandemic changed how brokers were able to do business. Unable to
meet their customers in person, and with lender criteria changing rapidly and government incentives being introduced, brokers needed a great deal of support. The aggregators talked about having to not only provide them with the tools and technology to do their jobs as efficiently as possible, but also to check in and make sure broker mental health stayed strong. They also put a real focus on education and
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S
Six aggregator groups gathered at MPA’s annual roundtable to discuss big industry topics like the best interests duty, the upcoming remuneration review, how they supported brokers during COVID-19, and their expectations for growing market share
training so that brokers could be constantly on top of all the changes in the lending market. One of the areas of particular interest to brokers was lender turnaround times, so the aggregators made sure they had systems in place to help brokers understand exactly what to expect from each lender and why. Another big topic of discussion at the roundtable was broker remuneration. As the review of remuneration instigated by the
Hayne royal commission approaches in 2022, there is increasing concern among brokers about what might happen. Fortunately, the aggregators seem confident that there is nothing to worry about. Keep reading to find out why. The panellists also talked at length about the best interests duty, which came into force in January. While they said it was too early to assess its impacts so far, they addressed the
fact that it was being tested in an environment like no other, and each aggregator has been supporting its brokers through the transition with development days and webinars. Thank you to everyone who joined MPA’s Aggregators Roundtable and shared their experiences of the last 12 months. In next month’s issue, find out how aggregators fared in the opinions of brokers in MPA’s Brokers on Aggregators survey.
www.mpamagazine.com.au
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AGGREGATORS ROUNDTABLE 2021 : In 2020 we were in the midst of the pandemic and had to do this roundtable virtually. What were some of the biggest challenges you had to work through last year? When we held the Aggregators Roundtable in May 2020, Australia was still in the grips of a lockdown, and the panellists were unable to get together in person. Like most other meetings across the country, the roundtable was forced into a virtual setting. A lot has changed since then, and with restrictions eased the aggregators were able to meet in person for the 2021 event. Looking back at the past year, Tanya Sale, CEO of outsource Financial, said the industry had faced “uncharted waters”. The aggregator didn’t have any issues in making the transition to a working-from-home environment. Instead, their main concern was for their members and ensuring they were supported in a holistic sense. “One of the biggest challenges when we were going through the pandemic was coming up with innovative ways to support our members digitally,” Sale explained. “We were able to do this on two fronts: professionally, through education and various opportunities to expand skill sets; and personally, delivering mindset and mental health sessions and creating our online ‘Lockdown Learning Centre for Kids’.” Responding to Sale, Connective executive director Mark Haron said the pandemic had been “an emotional roller coaster”, but he was impressed with how brokers had responded. He called out the period when banks brought in ‘repayment holidays’ and there was a lot of misunderstanding around what that meant, and therefore it had to be explained properly to customers. He said it was also difficult to get hold of the banks, and there was real caution about whether application numbers would stay strong. “May went nuts, and it just continued for the rest of the year,” Haron said. “For a lot of brokers there was a moment where they went, ‘I’m going to be good; I’ve looked after
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THE PANELLISTS
Blake Buchanan Specialist Finance Group
Mark Haron Connective
Brendan O’Donnell Liberty Network Services
Susan Mitchell Mortgage Choice
Tanya Sale outsource Financial
Chris Slater AFG
BROKERS
Bernadette Christie-David Atelier Wealth
my customers, things are going well for me, my business and my staff, but I’ve still got a lot of customers who are struggling’.” Concerned about people having “kneejerk reactions”, Mortgage Choice CEO Susan Mitchell said the aggregator tried to bring a sense of calm. As brokers panicked about application numbers, she assured them they would have plenty of time to react if numbers were affected, and, in the end, it was about helping them take hold of even more opportunities as the numbers blew up.
David August Initial Finance
“I think some of the brokers were a little hesitant to grab the opportunity, and then once the opportunity became clearer and clearer, everyone was on board,” Mitchell said. “Then it was, ‘how fast can I grow my business?’ and ‘now I’m struggling with too much business’. It was just a crazy up and down, but now they’re just thrilled. I don’t think anyone is as happy as an unhappy busy broker.” Agreeing that the start of the pandemic was filled with uncertainty, Liberty Network
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AGGREGATORS ROUNDTABLE 2021 Services (LNS) managing director Brendan O’Donnell said the first six weeks raised a lot of concern about where brokers’ businesses were going to end up. LNS communicated and worked closely with its broker network to help them with their customers, but it wasn’t long before they saw a shift. “I don’t think any of us anticipated that a month later we’d have this complete outlook reversal, with advisers asking, ‘I’m so busy – how do I manage this?’,” O’Donnell said. “Lender cashbacks certainly helped the increasing appetite for refinancing, plus we’ve seen a growth in renovations, etc. This sparked brokers to take a different mindset throughout 2020. Brokers have proved they are recession-proof.” To combat the fear and uncertainty many experienced at the start of the pandemic, AFG took a proactive and interactive approach to working and communicating with brokers. Home loans general
“For us, it’s been about how we facilitate those connections between you and your customer, where you can get together and find great outcomes for them” Chris Slater, AFG manager Chris Slater said the aggregator ran live webinars weekly, including sessions with government ministers, the Small Business Ombudsman, regulators, SME experts and AFG’s heads of risk and marketing. “We bring everyone in, and we do a live Q&A, and we found our brokers engaged; they were happy to ask questions and ask whatever they wanted to. It wasn’t just crisis management; it was making sure our brokers had as much information as they needed, and that just became normal,” Slater said. As brokers eventually saw huge demand, many businesses needed to grow to keep up. Specialist Finance Group aggregation manager Blake Buchanan pointed out that many brokers weren’t scaled up for the increase in business.
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But businesses that were trying to find new brokers or underwriters to join them were realising that the pool of quality applicants was dry. Many brokers who would have previously been looking for work were struggling with volumes as they were busier than ever. “One of the problems we have is you try and support your members in growing their businesses and alleviating some of the challenges with writing double and sometimes triple what they were doing the year before,” Buchanan said. “Somebody who might have taken up that opportunity in 2019 isn’t going to do it now because they’re happy with their present volume. We see brokers still facing those challenges potentially with a little bit
of burnout, not being able to find the right resources for their businesses.” Atelier Wealth co-owner and broker Bernadette Christie-David said for her the challenge was “fear of the unknown”. She questioned what would happen to her business and what would happen to her clients, many of whom were fearful themselves. Clients began calling to talk about refinances or what would happen if they lost their jobs, and as a broker dealing with the effects of the pandemic herself, she said it was a tough job. “We had a ‘reset’ moment in our business where we flipped fear into confidence,” she added. “We wanted to have confidence in our team that we’d come through this period stronger and better. We also wanted to give our clients confidence that we would handle their application and take any stress they had away from them. “It was a delicate balance to manage clients’ expectations, your own headspace and being physically stuck at home.” Initial Finance director David August praised the aggregators for the support given
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AGGREGATORS ROUNDTABLE 2021 BROKER QUESTION How can we reduce our time on deal submissions due to such heavy compliance? David August, Initial Finance: I think if we are to be focused and prioritise our clients’ needs, and get paid well for doing so, it’s the least we can do as professional brokers. We really need to spend that extra time with every client to make sure they are in the right product and ensure they also know what else is available to compare it to. Chris Slater, AFG: Our job as aggregators is to make sure we are building compliance by design in the process. We take as much friction out of it as we can. Brendan O’Donnell, Liberty Network Services: Balance the extra effort that may be required by educating your customers. If you do that well, your customer engagement will be more professional, you will have more satisfied customers, and the regulator will be happy. Mark Haron, Connective: BID’s an essential part of the platform of the reforms of the royal commission that led to our commission review that’s coming in 2022. Many of the challenges brokers are still facing can be largely addressed by deeper integration of the right technology platforms and disciplined and effective use of the platforms. Bernadette Christie-David, Atelier Wealth: This is going to force brokers to have to change the way they work, whether it is finding extra resources or building better processes in their own businesses. I think within time it will become business as usual, but it’s just that transition period. Blake Buchanan, Specialist Finance Group: When we went through NCCP – and now we’re where we are at with BID – if you compare what we did today to what we did in 2005, it’s worlds apart. Whilst we address our concerns with the regulators and lenders, brokers also have an obligation to present quality submissions, which will assist with reduced turnaround times. Susan Mitchell, Mortgage Choice: We’ve added a lot of task management software on top of the decisioning machine that helps brokers pick the loan, because that’s actually where they really save the time. It’s really easy to allocate tasks for an admin to do, but in our platform you can see the overall process and where the loans are at, and that’s made all the difference.
to the industry over the past 15 months. His brokerage became so busy that it had to include on its website a disclaimer asking clients to be patient during this time and letting them know that enquiries could not be addressed immediately. “Talk about turning something from a negative into a positive,” August said of the aggregators. “The relay of information, the implementation of technology and the support
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from the aggregators really needs to be commended. We often are vocal about the negative or bad stuff we encounter, and it’s very easy to forget to praise and acknowledge the good stuff that happens.”
: In terms of technology, what have you introduced to help brokers in their businesses? Needing digital tools to do their jobs when
“We see brokers still facing those challenges [of increased volume] potentially with a little bit of burnout, not being able to find the right resources for their businesses” Blake Buchanan, Specialist Finance Group social restrictions were in place, brokers began seeing a number of new technologies come through the pipeline. The panellists agreed that a positive from the pandemic was that it forced the hands of banks and lenders to implement technology such as electronic verification. Aggregators also introduced new technology, mostly aimed at making things easier for brokers. Connective provided a Client Centre inside its Mercury software which enabled brokers to send a link out to the client with forms to be completed virtually, and allowed for the uploading of documents – all things brokers used to do physically. “Now it’s like, OK, we can get all this information and we can actually assess you with all that information and start that process faster,” said Haron. “And clients are itching for that; they want this digital process, like using bankstatements.com and CashDeck to categorise living expenses. Customers are now letting brokers access their information digitally, which obviously leads nicely into the Consumer Data Right eventually.” Technology is also helping brokers stay compliant. LNS uses the KYC (Know Your Customer) platform, which enables brokers to send the aggregator their information via a web platform. It allows them to better engage with customers and reduce loan
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AGGREGATORS ROUNDTABLE 2021
processing times, creating a more positive customer experience. Before COVID-19, only around 30% of LNS brokers used the program, but this rose to 75% during the pandemic when brokers were forced away from in-person verification. Advisers had to embrace digital ways of engaging with customers during this period, using Microsoft Teams, Zoom and Facetime. However, O’Donnell said there was still some way to go in getting every broker to change old habits and use more digital tools. The proportion of LNS advisers using the KYC platform reduced to 60% as face-toface interaction became possible after the COVID-19 lockdowns. Still, the industry has made excellent progress, and digital tools are no doubt the new frontier when it comes to further improving broker– customer engagement. Slater commented that, as what brokers needed shifted so dramatically last year, aggregators were forced to get better at what they do. He added that being a broker had “changed forever”. “It’s making us change too, because we’re part of this journey, and we’re helping our brokers connect with customers and advise customers, so how do we facilitate that better?” he said. “For us, it’s been about how we facilitate those connections between you and your customer, where you can get together and find great outcomes for them.” Mitchell said that, with the introduction of the best interests duty, many of Mortgage Choice’s software changes were related to the duty and making sure brokers were able to document their conversations and recommendations made to customers. “There was a lot of change management across the entire broking industry with the introduction of the best interests duty as well as all the changes relating to COVID, so that was our experience,” Mitchell said. She pointed out that this was all done with the tech teams working at home, where she found they were much more productive. “That actually helped us, because it was
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so much change at one time. If they weren’t able to be that productive, we might have had some hiccups,” Mitchell said. Already allowing brokers to interact with their customers digitally, Specialist Finance Group felt that its systems were “COVID prepared”. Buchanan said that while the pandemic had created that urgency for everyone to get onto the same page, he still found that 25% of brokers had not yet fully automated their workflows. The use of technology, particularly as the industry moves further into open
banking, will hopefully also make it clear to regulators and the government that the industry needs tools like bankstatements.com and CashDeck. “As part of our systems we give postsettlement to our customers being able to access these financials,” Buchanan said, “and so if that’s put a rocket up CDR changes to give us access to open banking, it’s going to make everyone’s world a lot easier, and it’s really going to justify that position of what does a broker do for their customer post-settlement.”
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brokers are having to navigate this urgency, together with providing the product/lender solution in the customers’ best interests,” he said. “This creates challenges for brokers, and I believe they have managed exceptionally well, ensuring they meet the customer’s needs. Of course, this is where note-taking is essential.” AFG found that anxiety was high among its broker network when the duty kicked in in January. The group ran live webinars that hundreds of brokers logged into, with numbers dropping over March and April as brokers gained more confidence. “There’s still a few little bits and pieces [to clarify] around doing a top-up or a switch,” Slater said. “And one of the toughest challenges is the rapidly reducing interest rate market, so, for example, a broker wanting to put a customer from a 2.35 variable into a 1.89 fixed.” Slater added that another thing AFG had done was create two full-time BID coaching roles to help brokers with their files. The aggregator gives brokers two sets of scores so they can see how they scored before BID and in the current environment. “Some of them were getting an 80 on the old method and a 60 on the new method, and we just had to coach them on how to get up to an 80,” he explained. “The real answer is, it’s dying down. Our brokers are starting to get more and more comfortable.” Taking things “by the horns”, outsource
: What insights can you share of the first few months of the best interests duty? How are you supporting brokers in terms of BID? ASIC released its final regulatory guidance on the best interests duty in June 2020, clarifying what was expected of brokers, but many are still unsure what it will mean for them. Several questions were sent in by brokers who wanted to know how the aggregators were approaching the new duty. Pointing again to the fact that BID was introduced at a time of unprecedented turn-
“Commercial and small business is a massive opportunity. This is the new frontier where we can help more brokers grow their businesses” Brendan O’Donnell, Liberty Network Services around times for major lenders, O’Donnell said it was really interesting to work out how the duty would fit into that. “You’ve got customers who need a loan to urgently settle – they need money now – and
Financial “took the fear out of BID” by beginning its training back in 2020. The aggregator created mandatory online modules and increased the educational content it provided to broker members
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AGGREGATORS ROUNDTABLE 2021 to prepare them accordingly. It also hired a national education coordinator to spearhead its national training program on BID best practices and obligations. Sale said, “Our mantra is ‘Education is Empowerment’. It’s a promise to our members that we will always ensure they are prepped and ready to face challenges and opportunities with confidence and expertise. “In this landscape, it’s imperative brokers are educating their clients, and I believe it is an aggregator’s role to provide the skills, understanding and tools to empower them to do so.” Buchanan said Specialist Finance Group had not received any complaints about the process or requests for more content, which suggested it had been successful in its support for brokers. Acknowledging that every aggregator had “loaded up on content” last year, he added that SFG had its brokers do courses and sign attestations that they knew what they were in for. “Of course we’ll go through the peaks and troughs of compliance performance, but at this stage no complaints,” Buchanan said. “So the transition to BID has been one of those ones where there was a lot of hype about it, and it has kind of fizzled. It’s not as noisy as what I would have expected or thought.” O’Donnell responded with a warning, however, that it was important for brokers to have the right discussions with customers so they knew exactly what was happening. “In the last three months I’ve been asking brokers out there: ‘Have you had customers challenge or query or ask what BID is all about?’ The answer: ‘Not one’,” he said. “It comes back to the fact that customers trust their brokers. They’ve signed the documentation. And that documentation is comprehensive and made clear to customers. Of course, this also creates a challenge as we want to ensure that we don’t fall into the same position as financial planning, where in many instances customers don’t know what they are signing.”
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“You don’t have to be the expert in asset finance; there’s an internal expert you can give that deal to, knowing full well you can trust that person” Mark Haron, Connective : We’re seeing record house prices and record-fast property sales. What opportunities do these provide for your mortgage brokers? House prices have reached record heights in Australia, with 10% growth nationally in the 12 months to March 2021. At the same time, there have been record levels of mortgage lending; in the same period, there was 55% growth in housing loans commitments. While the industry is being buoyed by the strong market, and there is plenty of opportunity for brokers, Sale urged caution. “It’s important we don’t get lulled into a false sense of security,” she said, explaining that there were a number of factors that needed to be taken into consideration. “We are still seeing record-low interest rates, a lack of stock on the national market, and a steady stream of expats returning. And
while I’m not necessarily saying that we’re experiencing a false market, it is certainly not going to keep on going at the rate it is. “What we all need to be aware of is that when we start seeing the market shift – more stock, rate rises, etc. This is when we will see more consumers start to struggle and when brokers will be needed more than ever – ready to support and assist their clients.” Sale urged brokers to maintain consistent contact with the consumer to ensure the industry “keep[s] our finger on the pulse”. Mitchell added that she thought the current environment was the perfect opportunity for brokers to grow. She said the reality was that good brokers would consistently settle the same number of loans each month regardless of the market. “That doesn’t mean it doesn’t come down a little bit or go up a little bit, but really good
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AGGREGATORS ROUNDTABLE 2021 brokers that take care of their customers, deal with their customers, their volume is going to move up and stay at that level. This is their opportunity,” Mitchell said. Agreeing that there were opportunities for brokers, Haron said that while the current “frenzy” would calm down, he still felt the market would remain strong for some time.
“The best job in the market for probably the next 12 to 18 months is a real estate agent; second best job is a mortgage broker, because there’s a lot more properties coming on to the market, a lot of financial opportunities for purchases,” he said. As a consequence of high applications, there are also borrowers who are struggling
BROKER QUESTION Can we please hold the banks accountable for their SLAs, and the banks that have branches, for channel conflict? Mark Haron, Connective: No bank is purposefully trying to unconditionally approve a loan in 27 to 29 days. A lot of them can do it faster with the right devotion to resources, but operationally they’ve got it wrong. It’s important to also acknowledge that we’ve seen unprecedented volumes of applications coming through; I’ve never seen anything like this. Aggregators need to work closely with lenders and facilitate better and more efficient communication with brokers. We’ve brought the incredible wealth of data [and] we have access to life in an industry-first Lender Approval Time Dashboard to provide brokers with more data and transparency around approval time frames. Susan Mitchell, Mortgage Choice: We have a stop-light system that ranks lenders on their service levels. We’ve had it for six or seven years, and we update it daily. It’ll tell brokers how many days to initial assessment and what’s going on. It makes a big difference. Blake Buchanan, Specialist Finance Group: Commercially, we’re all competitors, so we can’t in some instances go as a unified front, but by all of us addressing these things individually we are making inroads. These bigger ones that are suffering the lengthiest delays – they have a lot of cogs in these big wheels, and it does take time to move them, and I guess for brokers it’s easy to look at aggregators and industry bodies and say they’re not doing enough, but the reality is we’re doing a whole ton of work behind the scenes. It’s a very big mountain to move, and we will get there; it’s about leveraging, getting attention to it and forcing change. Tanya Sale, outsource Financial: I often speak to my connections in ‘branch-land’ about channel conflict and branch SLAs, and some are writing as little as four deals a month. So, if we compare apples to apples, looking at the volumes mortgage brokers are writing, it’s no wonder that branch turnaround times are shorter. We can’t take these situations out of context; we have to look at the big picture. And the big picture is telling us that mortgage brokers are the channel of choice. In saying that, one would think that the lenders would put resources in place to reduce the high SLAs we are experiencing! Bernadette Christie-David, Atelier Wealth: In an ideal world, I’d love to say yes, let’s hold these lenders accountable, but this has been going on for quite some time and is still not resolved. Ultimately the client will choose who they want to work with (direct or via a broker), and clearly broker market share is reflecting clients voting with their feet. While it’s an uneven playing field, we as brokers can play to our strengths, which for us are policy and service.
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to get through to the banks. Buchanan said this was leading customers to try brokers for the first time and then realise that “they love what they get”. He said the pandemic had also created “refinance urgency”, which is seeing the average broker-introduced loan last for less time than it did a few years ago. He also believes it will become the new norm that customers will choose to use brokers and monitor their expenses much more closely. “Often we undervalue our own book. If people are refinancing every five years, and I’ve got 500 customers in my database, I should be mining 100 refinances a year post year five from my own business without having to market,” Buchanan says. “That’s the proposition. If that shortens to four years, well, you’re going to be doing more out of that 500 base. There’s a real opportunity to really harvest your own book.” Raising the topic of diversification, O’Donnell said this was another route brokers could take, particularly as many potential customers for new business would already be in their database. “Commercial and small business is a massive opportunity,” he said. “This is the new frontier where we can help more brokers grow their businesses
“Really good brokers that take care of their customers, deal with their customers, their volume is going to move up and stay at that level. This is their opportunity” Susan Mitchell, Mortgage Choice
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Redefining commercial finance
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AGGREGATORS ROUNDTABLE 2021 “It’s imperative that brokers are educating their clients, and I believe it is an aggregator’s role to provide the skills, understanding and tools to empower them” Tanya Sale, outsource Financial and build further industry market share.” Talking about diversification in more detail, the panellists proposed various ways that brokers could make the most of the opportunities available. Haron explained that Connective provides a service whereby a mortgage broker can pass on a customer to an internal asset finance specialist. “You don’t have to be the expert in asset finance; there’s an internal expert you can give that deal to, knowing full well you can trust that person, your client is going to get good service, and they won’t steal your client. Doing that with confidence, skilling up on the commercial side of things, working with other commercial brokers, there’s lots of opportunities there,” he said. Helping its brokers upskill, outsource Financial put together a program for commercial lending, Sale said. One residential broker who has been involved in the program for a couple of years has become one of outsource Financial’s best commercial brokers, she added. “It’s been very successful for our groups that have said, ‘OK, I have wanted to go into this space, and that’s where I want to specialise’ – and the mentoring program has been very successful,” Sale said.
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E o a p BROKER QUESTION How likely do you think changing to a borrower pays model will be? Chris Slater, AFG: We’re pretty confident that both sides of government, plus the overwhelming data that you spoke about, which is all the work we did through COVID, we’re just very confident that both sides of the argument believe that it’s not going to be in the interests of consumers for a borrower pays model to be introduced. Mark Haron, Connective: We can point to what Labour did with overregulating the financial planning industry. We have seen it get decimated, and the number of people getting financial advice has reduced so significantly because they can’t afford it. We unequivocally reject the recommendations to change the broker remuneration model in relation to a borrower pays model and the removal of trail commissions, and we’ll continue to advocate against it. Susan Mitchell, Mortgage Choice: The number of people entering the industry and becoming financial advisers is so low that there’s not going to be enough people to give the advice. To have the same thing happening in mortgage broking you’re going to completely decimate the whole competition that has been built up for brokers. I just don’t see it. Brendan O’Donnell, Liberty Network Services: The case for a borrower pays model is diminishing. We’ve seen the impact this had in the financial planning industry resulting in less customers reaching out for advice or walking away from advice due to the cost! We are also seeing banks’ bricks-and-mortar presence diminishing rapidly, redirecting many more customers to brokers. It’s important that we continue to back ourselves as an industry and recognise that current broker remuneration provides the customer with the best outcomer. Blake Buchanan, Specialist Finance Group: A flat fee for me is off the table. It would be hugely damaging to competition in Australia; it would push up rates to consumers – it’s got to go, it’s off the table. Around remuneration we probably want to talk about maintaining what we’ve got and the conversations we are having with regulators, Treasury and other stakeholders and why the model works are progressing.
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SECTOR FOCUS: ALT-DOC LENDING
Custom solutions for unique situations Borrowers who do not fit the typical lending criteria are becoming more and more common. Leading non-bank lenders explain how they are taking a more flexible and personal approach to helping these customers get finance TRADITIONALLY, Australian borrowers seeking finance have had to provide proof of income in the form of documents like payslips. This has often left people, like those who are self-employed, struggling to get access to finance. Resimac’s general manager, distribution, Daniel Carde, says “times have changed” and not everyone is a nine-to-five employee. In fact, different ways of working have become “normalised”, not just in terms of self-employed Australians but those with a mixed income from different sources. According to the ABS, in the December 2020 quarter the number of Australians working in multiple jobs increased by 8.6%.
“As business confidence has returned and the economy continues to recover, we’re expecting to see intense competition in the alt-doc space” Daniel Carde, Resimac Instead of asking for payslips, alt-doc lenders have more flexible income verification methods and will typically ask for documents such as an accountant’s declaration, six months’ business activity statements or three months’ BAS, or business bank statements.
LENDER’S TAKE How did COVID-19 have an impact on alt-doc lending at Resimac? Daniel Carde, Resimac: The pandemic has had minimal impact on eligible Resimac customers. Whilst we did introduce some additional documentation and verification requirements during the peak period, these were minor and really designed to support an application to make for a smoother approval process. We have since rolled these changes back. We wanted to continue supporting small businesses, so overall we took a sensible and calculated approach that enabled us to keep our doors open and maintain a supply of credit. At Resimac, we review each application individually on its merits, so this allowed us to closely monitor the ongoing situation and market conditions and adjust our appetite in response. But throughout the period, we didn’t need to make any wholesale changes – we had the confidence to keep lending.
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There has been strong demand for altdoc lending throughout the COVID-19 pandemic, and as the economy has revived demand has only grown. Carde says this will lead to great opportunities for brokers as the recovery continues. “As business confidence has returned and the economy continues to recover, we’re expecting to see intense competition in the alt-doc space,” Carde says. “We expect customer demand will continue to increase as they look to purchase and refinance, consolidate debt and start growing their investment portfolio again, and alt-doc lenders will continue to innovate and price competitively to attract this business.” It’s not only alternative income that means borrowers will require alternative documentation. Carde says Resimac under stands that “life happens”, and the non-bank offers loans for those who have faced credit
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LENDER’S TAKE Why should borrowers and brokers not be worried if they need an alt-doc loan?
impairments. As long as they’re on the road to recovery, an alt-doc loan can be used on their journey to becoming an eligible full-doc applicant. “Having an alt-doc loan gives them the opportunity to build a strong credit history and show lenders they have the ability to satisfy their commitments. Then, when the time comes, they can convert or refinance to another type of product,” Carde says.
“The issue for people working in these industries looking for finance is that the irregular nature of their employment often means that they sit outside major banks’ loan acceptance criteria,” Bannister says. “Without specialist lenders that can assess their applications manually, they are frozen out of the market.” La Trobe Financial has been in the altdoc space from the start, introducing the
“The issue for [some] people is that the irregular nature of their employment often means that they sit outside major banks’ loan acceptance criteria” Cory Bannister, La Trobe Financial Beyond the traditional self-employed or credit-impaired borrowers, Australia is also seeing a rise in the gig and freelance economies as well as the continued growth of the e-commerce industry. Cory Bannister, chief lending officer at La Trobe Financial, says all this creates a need for specialist lending solutions due to the temporary and transient nature of the employment and the self-employed nature of these industries.
Lite Doc loan back in 1990. Despite the self-employed community representing 44% of Australia’s workforce, the banks have withdrawn from alt-doc lending, but Bannister says La Trobe Financial intends to remain in this sector for the long run. “The financial landscape is likely to remain complex and uncertain in the short to medium term, and self-employed Australians will need the guidance and
Cory Bannister, La Trobe Financial: Simply, the only difference between an alt-doc loan and a fully documented loan is the method of income verification. Under alt-doc an alternative method is used which typically includes a certification from the applicant’s accountant as to what the applicant’s income is, and confirmation that they believe the applicant can meet the repayment obligations without substantial hardship. This certification is then followed up with a telephone interview with the accountant to reconfirm the information. It could be argued that in certain circumstances, such as complex corporate structures, this method of speaking to the applicant’s accountant and verifying the applicant is superior in that it is less likely that the financial position will be misinterpreted. Finally, brokers themselves fit the typical profile of an alt-doc customer: self-employed with variable income. Who better to understand why this product is so important to the market?
support of brokers and NBFIs [non-bank financial institutions] to ensure credit is appropriately provided,” Bannister says. “To that end, we stand ready and willing to assist brokers and their clients during the rebuild phase of the post-pandemic economic recovery and beyond.”
Businesses hard hit by COVID-19 As uncertainty over employment has had a significant impact on borrowers’ ability to get finance, Liberty has seen “unprecedented demand”. In helping customers “get financial”,
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FEATURES
SECTOR FOCUS: ALT-DOC LENDING
LENDER’S TAKE What alternative documentation is needed by borrowers, and why? John Mohnacheff, Liberty: We take a flexible approach, and the kind of documentation we need to approve a loan can differ from case to case. While some borrowers may not have current tax returns or payslips, things like bank statements and accountants’ letters help our underwriting team assess whether they can service the loan. Sometimes it’s a matter of simply having a chat with the customer to find out their situation and asking what sort of documentation might be available. And that’s why our partnership with our business partners is so important. By looking at the whole picture and assessing each application case by case, we’re able to support a wider range of borrowers in achieving their financial goals.
“We know not everyone fits in the same box, and there is often more to a customer’s story than what is listed in their credit file” John Mohnacheff, Liberty Liberty understands the important role that specialist lending plays. Group sales manager John Mohnacheff says that now more than ever customers need flexible options. “We know not everyone fits in the same box, and there is often more to a customer’s story than what is listed in their credit file,” he says. “For those with more complex needs, refinancing to specialist loans has helped them to free up extra cash to cover income shortages, for example. For others, going for a more custom solution has allowed them to take advantage of new investment opportunities.” While most areas of business have adapted to the new normal, some sectors are yet to recover. Mohnacheff points to the tourism, hospitality and entertainment industries as being hardest hit. He adds that the rapidly changing landscape has also made it difficult for businesses to return to their former capacity.
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“Government stimulus programs like JobKeeper and the SME Guarantee Scheme, which Liberty is a part of, have made a tremendous impact in helping many businesses to keep their doors open. But others have had to close permanently, and this continues to affect a small percentage of borrowers,” Mohnacheff says. With an event like a global pandemic, Bluestone chief lending officer James Angus says it stands to reason that all businesses would be affected in one way or another. Although businesses like cafes and restaurants may have recovered, the impact of any temporary cash flow challenges during the lockdown would still make it difficult for them to access finance. The option to provide alternative documentation like BAS or business bank statements can mean the temporary closure of a business doesn’t negatively impact serviceability calculations. Alt-doc lending can also be suitable for
businesses that have actually benefited from the restrictions. “Many online-based businesses have significantly benefited from the new remote way of living, so two years’ tax records may again show reduced serviceability due to their significant growth,” Angus explains. “For these borrowers, an alt-doc loan can be helpful, as looking at more recent financials will boost their ability to get the investment they need.” While there is little awareness or understanding of alt-doc loans among borrowers, Angus says there is no reason they need to be more complicated than a full-doc assessment; it’s all about making sure all documents are lined up and tell a consistent story, and any irregularities are clearly explained. “Needing an alt-doc loan is not inherently a sign of a weaker application or worse financial standing. There are a lot of scenarios in which extremely strong borrowers find alt-doc suits their individual needs better,” he says. An alt-doc loan is also subject to the same enquiry, verification and assessment process as full-doc loans, including the need for credit checks and repayment histories. Pepper Money’s general manager, mortgages and commercial, Aaron Milburn, says using all the alternative documents, like BAS, business bank statements and a Pepper Money accountant’s letter, allows the lender to gain a solid understanding of the customer’s income and loan serviceability. With no automated decisioning, Pepper’s credit assessors will manually review each deal and ask questions to get a more detailed view of the borrower’s circumstances. “With more and more Australians choosing to start their own business, alt-doc lending is becoming more common. With that trend set to continue, brokers and their customers should approach alt-doc lending with confidence,” Milburn says. “By using the information in these documents, we calculate loan serviceability from
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A c
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H M i s o w h e fi t
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With LNS you get the best of both worlds: The support of a team and the freedom to build your own business. We celebrate you as an individual, while offering the benefits of a strong and vibrant community.
Helping people is not just a 9-5 job for Maria Finneran. While by day her passion is to help homebuyers find the finance solution to suit their needs, out of hours, one of her many activities is volunteering with St Vincent de Paul helping the homeless. It’s with this compassion and empathy that Maria helps customers get financial and into a new home, whatever their circumstances. Thank you, Maria.
...PS, and when I’m not helping you build your business; you’ll find me on the bike. - Brendan O’Donnell Managing Director, Liberty Network Services
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To find out more about becoming a Liberty Adviser, visit liberty.com.au/LNS.
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Home loan specialist with heart.
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Inspiring borrowers and footballers alike. Whether it’s securing a loan or securing a win on the football field – as a broker and coach, Brett Foster knows the importance of having a strategy in place to achieve one’s goals. Waking before 5am to carry out his own fitness regime each day, Brett brings the same discipline and determination to his work - staying sharp to help more people get financial. We reckon that makes you best on ground, Brett. Brett, coach
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FEATURES
SECTOR FOCUS: ALT-DOC LENDING
the business’s earnings at the present time, rather than a business’s tax return that at times can be over a year old.”
No additional risk for brokers As the economy recovers, alt-doc lender Thinktank believes this type of lending will really increase over the next 12 to 18 months while businesses’ current trading and earnings are being more accurately determined. Up until March 2021, the group was still
self-certification of current earnings, which is then supported by one of various verification document options. The lender’s Mid Doc product is also available to residential mortgage customers. Peter Vala, general manager, partnerships and distribution at Thinktank, says alt-doc solutions are a great addition to what a broker can offer due to their flexibility and speed. He adds that regardless of product type, it needs to be in the customer’s best
“Alt-doc lending is becoming more common. With that trend set to continue, brokers and their customers should approach alt-doc lending with confidence” Aaron Milburn, Pepper Money accepting end-of-year financials for 2019, along with confirmation of current income, given that the 2020/21 financial year may not provide a true reflection of performance. Thinktank offers a number of alt-doc products on the commercial front, including its Quick Doc and Mid Doc loans. Both products revolve around the borrower’s
interests, but there are no additional risks when dealing with an alt-doc loan. “This means assessing its overall value based on price, SLAs and ability to meet the customer’s stated objectives,” he says. “It’s important to note that interest rates do tend to be slightly higher for alt-doc loans than for a full-doc loan; however, the gap
LENDER’S TAKE Why/how did COVID-19 have an impact on borrowers’ abilities to get finance? Aaron Milburn, Pepper Money: We have been seeing an increase in alt-doc loans in the past 12 months. Plenty of businesses were impacted by COVID-19, affecting their revenue for the year. Since then many have bounced back and are wanting to move forward. Likewise, with many Australians beginning to work on their own passion projects and businesses, proof of ‘standard income’ is often something these borrowers don’t have when it comes to applying for a home loan. With Pepper Money’s ability to consider alternative sources of income verification, such as the last six months’ business bank statements or BAS, we can gain a solid understanding of the customer’s income and loan affordability as it stands today.
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has been progressively closing over time. “Using an alt-doc loan is certainly an acceptable financing solution provided you adhere to your obligations under BID, and when applied correctly it does not place any additional risk on you as an authorised representative or ACL holder.”
Supporting business reinvention By not considering an alt-doc loan as a viable solution, Carde says brokers may not in fact be acting in the best interests of their customers. They should be looking at a borrower’s whole financial situation, which is where an alt-doc product might stand out as the best option. “The interest rate isn’t the only metric a product should be judged on when it comes to presenting the best options to customers,” Carde says. Working with brokers under the new BID regime, Resimac is focusing on communication to ensure they are across all the alt-doc offerings. This includes providing one-on-one support from BDMs and relationship managers, as well as regular EDMs and dedicated resources on the broker portal. Brokers – particularly those new to alt-doc loans – are encouraged to call to discuss scenarios. “As we come out the pandemic, we’ve seen some businesses reinvent themselves, and they’re now trading better than ever. In these instances, their dated tax returns are really of little value,” Carde explains. “For those businesses that did see a downturn, for the most part, they are now on the road to recovery. In both situations, alt-doc could provide the best insight into their current position for businesses looking to refinance, consolidate debt, purchase or invest. This presents a great opportunity for brokers to reach out to eligible customers to see if they can help.” Bannister adds that the opportunities are likely to only increase as the self-employed sector continues to grow and more and more people begin operating online businesses
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FEATURES
SECTOR FOCUS: ALT-DOC LENDING
outside their normal day jobs. He predicts the market will remain complex for some time, and says non-banks like La Trobe Financial are perfectly suited to providing credit to credit-worthy, self-employed applicants thanks to the custom nature of its credit assessments. “We provide an appropriate tailored solution to meet the customer’s objectives and requirements, and we think it’s unlikely the major banks will reverse their long-term ‘simplification’ trend focusing on super prime home loan borrowers in any case,” he says. He also expects brokers to receive a major boost off the back of COVID-19. “History tells us that complex and confusing environments provide tailwinds for brokers,” he explains. “The net result should be broker share holding above 60%, and a targeting of the 70% milestone. “We are looking forward to the year ahead, doing what we do best, which is helping brokers and their clients find financial solutions when they need them the most. We expect that 2021 is going to be a time when our solutions are in demand more than ever.”
Alt-doc a pathway to future borrowing For Pepper Money, upskilling brokers is “a critical component of increasing awareness” of solutions like alt-doc lending. The non-bank’s broker support team provides them with an in-depth understanding of specialist solutions and how they can further assist the self-employed sector. Milburn says Pepper Money’s key focus is on helping brokers identify when and why an alt-doc solution is suitable, and explaining the reasoning behind how the non-bank calculates serviceability. “Alt-doc lending is there for those customers who are passionate about continuing to run their own business and want to achieve the goal of homeownership,” Milburn says.
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LENDER’S TAKE What insights can you share from the last 12 months on borrowers needing alt-doc loans? James Angus, Bluestone: We’ve continued to see a steady demand for alt-doc loans over the last 12 months, with a broad range of circumstances that have led self-employed borrowers to prefer alt-doc options. For example, many businesses have experienced significant fluctuations in turnover over the last 12 months, and tax returns might not be an accurate reflection of their financial standing, which can influence serviceability. This type of scenario often leads self-employed borrowers to seek out alternative ways of proving their income that can provide a more accurate picture of the business’s circumstances going forward.
“Brokers who can help these borrowers with alt-doc as well as full-doc options have the potential to gain their trust and loyalty faster” James Angus, Bluestone “Alt-doc loans can potentially assist customers’ future borrowing as the equity built in that home can be utilised to further build a property portfolio, should they wish to. Alternatively, they could use that same equity to purchase a commercial property to further support their own business. “We believe self-employed clients are greatly underserved, and providing these borrowers with an alternative option is incredibly rewarding.” The flexibility of alt-doc loans means brokers need to not only have initial conversations with their borrowers but also remain in contact with them for the life of their loan to assess how their situation changes. Vala says alt-doc loans can be written for either long-term or short-term borrowing; Thinktank allows conversion from its Quick Doc product to Mid Doc to Full Doc.
“They can be written for 25 to 30 years but can also be moved to other forms of loans if the borrower’s needs change,” he explains. “There may come a time when moving to a full-doc loan is more beneficial. If this is the case, all we need is the verification requirements of a full-doc loan to be met and for the borrower to demonstrate serviceability at lower benchmark ratios.”
Specialist loans a valuable tool A key factor that leads a customer to use a broker rather than going directly to a lender is the level of options the broker can provide, says Mohnacheff. It makes sense, then, that brokers should ensure they can support customers with specialist options that can be tailored to their individual circumstances. Specialist lending can open
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ME Bank broker
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FEATURES
SECTOR FOCUS: ALT-DOC LENDING
up “a world of opportunity” for them, he says. “For some borrowers, a specialist loan may be their only option, but for others, going for a more custom loan can be a valuable tool to leverage their cash flow and make the most of their current circumstances,” Mohnacheff says. “Taking out a specialist loan can also improve a borrower’s credit history significantly, and it can help them to move into a more positive financial position.” Mohnacheff adds that although the changing climate can make it difficult to predict what the future holds, it is likely that borrower demand for specialist loans will continue to grow. “As more customers become aware of the advantages that a specialist loan can offer, we can expect to see this increase in popularity continue to soar,” he says. In its efforts to help brokers understand more about self-employed customers and the lending options available, Bluestone is planning to roll out a self-employed masterclass to educate them. The non-bank has already launched the program in New Zealand with positive feedback. The masterclass goes into detail about income verification and provides resources for advisers to take home and make use of. Angus explains that because of the extra layer of complexity that self-employed income verification can present, building relationships with self-employed customers can lead to profitable and mutually beneficial long-term relationships. “Self-employed borrowers are often timepoor and need solutions quickly. Brokers who can help these borrowers with alt-doc as well as full-doc options have the potential to gain their trust and loyalty faster than those who can only help with full-doc solutions,” Angus says. Adding that he expects the effects of COVID-19 on businesses to last “for years to come” as most full-doc loan options
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“Interest rates do tend to be slightly higher for alt-doc loans than for a full-doc loan; however, the gap has been progressively closing over time” Peter Vala, Thinktank require two full years’ of tax records, Angus believes that alt-doc solutions will continue to be important. “Beyond the pandemic, there will always be circumstances that make alt-doc loan
options the preferred way to prove income for some self-employed customers, and with the property market thriving, there’s no reason to expect demand to slow down,” he says.
LENDER’S TAKE Why/how did COVID-19 have an impact on borrowers’ abilities to get finance? Peter Vala, Thinktank: At Thinktank we always do our best for brokers and borrowers, and as such continued providing finance through the height of COVID. Unfortunately, many borrowers’ businesses suffered reduced income levels during this time. As a responsible lender it was critical that we clearly worked with brokers to understand the impact of COVID on each borrower and their current earnings, requiring additional questioning and supporting documentation. The impact of this, as reflected industry-wide, was approval time frames for brokers and customers extending a little but not significantly. Thankfully, as industries recover, these time frames have now returned to normal levels.
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12th ANNUAL
BROKERS ON
NON-BANKS
The mortgage industry’s biggest and most well-established survey into the performance of Australia’s non-bank lenders.
Who will come out on top this year? Have your say and go into the prize draw to win a pair of Apple AirPods. The Brokers on Non-Banks 2021 report will be published in issue 21.10 of MPA magazine, out in October.
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SURVEY OPENS 28 JUNE 2021 For more information, visit www.mpamagazine.com.au 30-39 Alt Doc Lending_SUBBED.indd 39
01/06/2021 7:50:58 am
FEATURES
SECTOR FOCUS: REFINANCING PROPERTY PORTFOLIOS
Brokers well placed to help with complex property deals Refinancing properties might be an everyday deal for many mortgage brokers, but what about refinancing an investor’s entire portfolio? Three lenders talk to MPA about the complexities involved and how they support brokers
SINCE MAY 2020, refinancing deals have exceeded all expectations as borrowers seek to take advantage of low interest rates and secure their positions in the uncertain COVID-19 environment. Refinance enquiries are coming not just from owner-occupiers but property investors as well, who are looking to make the most of record-low rates. According to the ABS, in June 2020 there were $5.5bn worth of investor refinances to new lenders. In the same month, $3.3bn worth of investor loans were refinanced with existing lenders. That was the highest-value month of the year, but even the most recently released figures for March 2021 show that $4.8bn in loans were refinanced externally and $2.6bn were refinanced internally. For investors with portfolios comprising several properties, savings on interest rates can make a huge difference. “These lower rates obviously reflect back to lower repayments, which give investors greater savings to reinvest into things like renovations or property upgrades,” says Melissa Christy, lending product lead at
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REFINANCES EXPECTED TO DRIVE NEW BUSINESS
end of 2019 and has seen a “great response” from investors.
Which of the following do you expect to be the key driver of activity for mortgage brokers this year?
Refinancing multiple properties
5% 38%
Refinancing
57%
First home buyers Investors Source: HashChing
smartbank 86 400. “Lower repayments also mean a higher return on investments across the portfolio, which can allow for further investment down the line.” The bank began offering loans towards the
For investors with property portfolios, 86 400 allows one single application for multiple properties, either as individual deals or with cross-securitisation. If an investor has numerous properties and loan products with different banks, this gives them the ability to connect their external accounts via the app, which gives them a better view of their complete financial picture. Christy says brokers need to determine the optimum way to structure a deal to the best benefit of the customer, and she advises them to look at what solutions a lender can offer for multiple properties. For instance, 86 400’s ‘Own’ home loan allows five separate loans for one annual fee, regardless of the number of security properties or separate deals. “Most lenders offer a solution for multiple properties,” Christy says. “The biggest challenge is finding the lender that will be able to
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provide a product which will suit the investor’s circumstances the best. That is where a broker can help and is often best suited to doing the legwork for the customer to find a solution which fits.” On top of the low interest rates, one of the big drivers of refinance numbers over the last year was lenders’ cashback offers. ME, for instance, offers a $2,000 cashback incentive. The bank works with property investors to help them “get ahead” and uses tax-free rent shaded to 80% in its serviceability calculations. It can also link applications to achieve aggregated pricing on interest rates for the total combined borrowing amount; offers up to 90% LVR, including lender’s mortgage insurance; and can accept the rental amount
“The biggest challenge is finding the lender that will be able to provide a product which will suit the investor’s circumstances the best” Melissa Christy, 86 400 from a signed tenancy agreement, even if the rent assessment in a valuation differs. “ME has some great options when it comes to refinancing or investing that can help property investors get ahead,” says Mathew Patterson, head of broker sales at ME. The bank’s BDM team is on hand and committed to helping brokers navigate the
best solutions for their clients. There are some potential obstacles that property investors need to look out for, however. “With a heated property market and interest rates so low, one challenge could be getting the valuation you need or making sure your debt-to-income ratio stays lower than seven,” he says.
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FEATURES
SECTOR FOCUS: REFINANCING PROPERTY PORTFOLIOS
INVESTOR REFINANCES SOAR $6,000,000
Value of property investor refinances – external
Value of property investor refinances – internal
$5,000,000
$4,000,000
$3,000,000
$2,000,000
$1,000,000
0
Mar 2020
Apr 2020
May 2020
Jun 2020
Jul 2020
Aug 2020
Sept 2020
Oct 2020
Nov 2020
Dec 2020
Jan 2021
Feb 2021
Mar 2021 Source: ABS Lending Indicators
“We all have a responsibility to engage with the customer to uncover everything – to get a holistic view of the customer’s circumstances” James Davies, Virgin Money How brokers can help investors When it comes to the risks and challenges that investors with property portfolios can face, Virgin Money’s state manager for WA and SA, James Davies, says there isn’t one perfect answer to suit all customer types. Challenges to consider in refinancing could be around the localisation of properties and their value, how the loan product was originally set up, whether or not there was LMI at the time of acquisition, and whether
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there have been any capital improvements to the value of the properties to enable a refinance without incurring LMI again. A mortgage broker is in a prime position to have those conversations with borrowers to work out what they need. Davies says it’s important that brokers look out for anything that might hold the transaction up down the road. “We all have a responsibility to engage with the customer to uncover everything
– to get a holistic view of the customer’s circumstances,” he says. “It’s our responsibility to enable the brokers with the right information and help them with questions they may or may not have thought out with their customers. By helping brokers find the right information with their customers, we are enabling them to ensure there is a quick and seamless transition through the assessment process.” Brokers will find that some investors with multiple properties will want to bulk all their properties together with one lender, and others will think it’s too risky to have all their eggs in one basket and instead will choose to hold various properties across various lenders. Virgin Money allows borrowers to collateralise their properties to offset a better LVR
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position and get a better price point relative to the total borrowing. In assessing a refinance application from an investor, particularly one heavily reliant on rental income, Virgin will look at their overall financial position to ensure the best servicing is on the table. But Davies says there can be a number of restrictions to the security types and the way the lending structure is set up. “There can also be concentration risks if customers do own a number of properties that are concentrated within one development, or next door to each other in the same street,” he says, explaining that there are myriad ways these transactions can be facilitated.
In working with brokers, Davies says Virgin offers a real relationship benefit. While brokers may not find refinancing a property portfolio to be a daunting task, especially if they have done it before, many customers might. “Customers want to have faith and trust in their broker. They also want to know their broker is being supported by their lender, giving them support throughout the transaction,” says Davies. “We are there to foster those deep relationships to completely support what it is the customer is trying to achieve. We are empowering our brokers with our online tools to support their customers throughout
all transactions and achieve their investment goals.” Davies says brokers working with investors who have property portfolios should be aware that Virgin Money offers a high level of end-to-end support. Its process supports brokers from the moment they meet their customers for the first time right through to approval. “The time and detail we provide is where our uniqueness sits. We understand that most brokers may need specialist attention, and we are here to help. Brokers can call on their business development manager to assist in providing investor options available for their customers,” he says.
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SPECIAL REPORT
BROKERAGES 2021
MPA celebrates the top brokerages across Australia with a winners list that’s bigger than ever before
CONTENTS
PAGE
Feature article ......................................... 46 Methodology ........................................... 47 2021 winners list ...................................... 49 Profiles ....................................................... 51
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SPECIAL REPORT BUSINESS STRATEGY
TOP BROKERAGES 2021
BROKERS PROVE THEIR WORTH AFTER AN incredible year of brokers helping borrowers through one of the most challenging environments in a generation, MPA has expanded its Top 10 Brokerages list to celebrate even more brokers. This year, there are 25 brokerages in this prestigious list boasting astonishing figures. These results are an indication of just how busy the mortgage broker industry has been over the past 12 months. The number one brokerage in 2021 increased its value of loans by 27% this year. The rise in loan settlement values reflects the remarkably strong housing market of the past 12 months. While brokers started the
year concerned that demand for home loans would fall, sentiment changed as the market instead saw an influx of new borrowers and customers wanting to refinance. In May 2020, the value of total loans for new housing was $16bn. Since then, this value has only continued to grow, reaching more than $30bn in March 2021. While the number of new loans for housing dropped to their lowest point last May, refinancing was already strong as the national lockdown and restrictions made borrowers cautious. In 2020, external refinancing grew from $6.2bn in February to $9.4bn in May. It grew again in June, to
TOP BROKERS BY STATE AND TERRITORY
Queensland
Western Australia
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4
South Australia
New South Wales
14 Victoria
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$9.8bn, before dropping to $7.3bn in July – which was still much higher than preCOVID values. Refinancing levels are still strong: March 2021 saw another month of $9bn-plus worth of external refinancing. The highest value to date of internal refinances, which surpassed $5.8bn, was also recorded in March.
Cash rate, incentives boost demand
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The rise in loan settlement values reflects the remarkably strong housing market over the past 12 months
2 Australian Capital Territory
A combination of factors have contributed to the increase in both new home loans and refinances – most notably record-low interest rates. At the start of 2020, the RBA’s cash rate was at 0.75%; this dropped to 0.25% in March and fell again to 0.10% in November. From 2016 to 2019 the RBA had held the cash rate at 1.50%, but banks at the time were announcing out-of-cycle rate hikes due to global funding pressures and regulatory requirements. Now, banks have been passing on rate cuts, and borrowers are keen to take advantage.
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FROM THE SPONSOR Commonwealth Bank is honoured to sponsor MPA’s 2021 Top Brokerages report. We know that customers value the service that brokers provide, which is why we are committed to supporting the industry. I want Adam Croucher, to take this opportunity to thank all of our broker General manager, third party banking, partners for their ongoing support and commitment Commonwealth Bank to providing exceptional service to customers during what has been an incredibly challenging year. We are focused on continually improving the experience to make our partnership stronger, because we believe we’re better together.
The government’s various incentive schemes have also helped boost the number of homebuyers on the market. The First Home Loan Deposit Scheme was particularly successful; it allowed first home buyers to purchase a property with a deposit of as little as 5%. This led to a huge influx of first home buyers, with the segment making up 36% of the total number of home loans by December 2020, an increase of 5% on the previous year. The figures from March 2020 to March 2021 show a 67% rise in the number of owneroccupier first home buyer loans. The scheme was so successful that the
We will continue to invest in simplification, technology, partnerships and education to support your success and ensure the sustainability of the industry. Congratulations to the brokerages that have achieved Top 25 status – your hard work, dedication and customer focus have brought you to the pinnacle of your industry. Enjoy the accolades and all that this achievement brings to your business.
home buyers, with a grant to build a new home, substantially renovate an existing home or buy an off-the-plan home. As an incentive for refinancers, banks have also been offering cashback deals. While these have been partially blamed for blowing out lender turnaround times and are not always as worthwhile as they may seem, many borrowers have been enticed by them. The number of property investors coming onto the market has also increased. From March 2020 to March 2021, there was a 54% rise in the number of loans to investors. Even in the three months to March 2021
Prices are continuing to rise, and as they do, it is thought that many buyers are experiencing a fear of missing out and are rushing to buy properties
METHODOLOGY To find the Top Brokerages of 2021, MPA invited Australian brokerages to submit their figures for the period 1 March 2020 to 28 February 2021. The online form also asked for details such as the number of active brokers working at each brokerage, as well as its total loan book value and conversion rate. To be eligible, brokerages needed to have four or more loan writers in a single office headquartered in Australia. Aggregator information was also provided by applicants, and their aggregators were then required to verify the details submitted. The final ranking is weighted across four areas: total loan book size, average settlements per loan writer, total settlements in the specified 12-month period, and conversion rate. Each brokerage was ranked in each of these areas and the ranks were then combined to produce a final tally.
27% government announced that it would be extended as part of the 2021 budget. It also introduced a new Family Home Guarantee that gives eligible single parents the opportunity to buy a home with a 2% deposit. The HomeBuilder Scheme also attracted more than 121,000 applications. It provided eligible owner-occupiers, including first
there was a significant increase in investors; during the same period, the number of first home buyers dropped, leading experts to believe that investors are muscling their way in at auctions. Property prices have been another factor contributing to the growth in home loans. Prices are continuing to rise, and as they do,
Annual increase in value of loans settled by 2021’s number one brokerage
$1,532,219,723 Highest value of loans settled by a 2021 Top Brokerage
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SPECIAL REPORT BUSINESS STRATEGY
TOP BROKERAGES 2021
TOP BROKERAGES: THE NUMBERS
$1,493,384,409 Average total loan book value
$541,297,303
Average total settlements from 1 March 2020 to 28 February 2021
80.5%
Average conversion rate
17.8
Average number of loan writers
307
Combined years in operation
Unlike last year, more than one brokerage wrote over a billion dollars in loans in the 12 months to March 2021 it is thought that many buyers are experiencing a fear of missing out and are rushing to buy properties. The same trend is being seen with refinances as longer-term fixed rates begin to rise and borrowers rush to fix their loan before rates increase further. According to expert property investor Michael Yardney, secondary properties are selling way above vendor expectations. “Normally at the beginning of the property cycle there is a flight to quality – people remember the types of properties that held their values well during the downturn, and avoid secondary properties,” he said in recent commentary. “But currently, I’m
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seeing some buyers so worried the market is going to pass them by that they are compromising their selection criteria just to get into this market.”
Top Brokerage figures improve The highest value of total settlements in the year from 1 March 2020 to 28 February 2021 reported by MPA’s Top Brokerages was Shore Financial’s $1,532,219,723. This was up by just under $500m from 2020’s highest value of loans settled in a 12-month period, by the same brokerage. Shore Financial has added 11 additional loan writers since last year, and its average
loan settled per broker has dropped. Unlike last year, more than one brokerage wrote over a billion dollars in loans in the 12 months to March 2021. My Local Broker wrote $1.4bn, up from $950m in 2020’s list. It did this with 60 fewer loan writers than the previous year. Two brokerages had total loan books of more than $3bn but were pushed down the list by lower conversion rates and high numbers of staff, making their average value of settlements per broker much lower. Conversion rates were much better this year. The average conversion rate of last year’s top 10 brokerages was 76%. For the top 10 in this year’s list, the average is 82%. The lowest conversion rate in the entire list this year was 61%, whereas the lowest rate in 2020 was 42%. The improvement in conversion rates could be down to mortgage brokers getting used to the extra scrutiny from the banks, as well as their greater use of technology over the past year, which enabled more specific detail around borrowers’ living expenses and tools, ensuring brokers had uploaded all the right documents. It is also interesting to note that the majority of this year’s winning brokerages came from Victoria. There were 14 Victorian brokerages, compared to just four from NSW. The total value of owner-occupier loans written by winning brokerages in Victoria was slightly behind NSW’s over the last year. However, there were more first home buyers in Victoria than in NSW over the 12 months from 1 March 2020 to 28 February 2021. This segment of the market is much more likely than experienced property buyers to use a broker, and were particularly driven to do so in the last year by the government incentives for first home buyers.
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BROKERAGES 2021
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Keylend Total loan book value: $3,007,500,000 Total value of settlements: $737,053,581 Conversion rate: 85% / Number of loan writers: 82
Total loan book value: $2,908,390,058 Total value of settlements: $864,838,938 Conversion rate: 91% / Number of loan writers: 12
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Tiffen & Co Total loan book value: $2,030,000,000 Total value of settlements: $480,000,000 Conversion rate: 98% / Number of loan writers: 5
Astute Melbourne City South and Gippsland Total loan book value: $583,174,827 Total value of settlements: $250,507,412 Conversion rate: 97% / Number of loan writers: 4
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AUSUN Finance Total loan book value: $774,618,604 Total value of settlements: $358,931,047 Conversion rate: 95% / Number of loan writers: 12
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Entourage Total loan book value: $711,042,977 Total value of settlements: $260,348,156 Conversion rate: 93% / Number of loan writers: 5
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The Loan Company Total loan book value: $2,165,617,576 Total value settlements: $503,843,761 Conversion rate: 70.19% / Number of loan writers: 19
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Inovayt Total loan book value: $1,100,000,000 Total value of settlements: $503,302,588 Conversion rate: 70% / Number of loan writers: 17
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My Local Broker Pty Ltd Total loan book value: $2,343,732,726 Total value of settlements: $1,412,116,212 Conversion rate: 69% / Number of loan writers: 90
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Aussie Prospect Total loan book value: $724,308,388 Total value of settlements: $282,696,791 Conversion rate: 74% / Number of loan writers: 8
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Nu-Age Finance Total loan book value: $889,704,645 Total value of settlements: $328,408,584 Conversion rate: 75% / Number of loan writers: 14
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Empower Wealth Advisory Total loan book value: $1,012,852,570 Total value of settlements: $413,042,391 Conversion rate: 61% / Number of loan writers: 13
The Australian Lending & Investment Centre Phone: +1300 ALIC AU Email: enquiries@alic.com.au Website: www.alic.com.au
Catalyst Advisers Total loan book value: $1,150,000,000 Total value of settlements: $575,000,000 Conversion rate: 93% / Number of loan writers: 4 Shore Financial Total loan book value: $3,775,275,683 Total value settlements: $1,532,219,723 Conversion rate: 66% / Number of loan writers: 31 Clarity Financial Group Phone: 02 6209 1990 Email: admin@clarityfinancial.com.au Website: clarityfinancial.com.au Total loan book value: $1,630,852,349 Total value of settlements: $539,383,469 Conversion rate: 72% / Number of loan writers: 8
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Smartmove Professional Mortgage Advisors Total loan book value: $2,405,785,060 Total value of settlements: $799,339,649 Conversion rate: 63% / Number of loan writers: 14
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UFinancial Total loan book value: $1,599,947,186 Total value of settlements: $549,359,848 Conversion rate: 72% / Number of loan writers: 14
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My Mortgage Freedom Total loan book value: $850,000,000 Total value of settlements: $408,000,000 Conversion rate: 88% / Number of loan writers: 7
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Green Finance Group Total loan book value: $1,135,577,224 Total value of settlements: $465,936,410 Conversion rate: 82% / Number of loan writers: 10
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Acceptance Finance Total loan book value: $1,369,721,000 Total value of settlements: $468,543,397 Conversion rate: 92% / Number of loan writers: 16
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Aqua Financial Services Pty Ltd Total loan book value: $713,934,676 Total value of settlements: $200,712,255 Conversion rate: 85% / Number of loan writers: 6
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Loan Gallery Finance Total loan book value: $2,488,732,996 Total value of settlements: $909,734,223 Conversion rate: 71.04% / Number of loan writers: 36
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The Financiers Group Total loan book value: $430,000,000 Total value of settlements: $205,000,000 Conversion rate: 95.3% / Number of loan writers: 7
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IChoice Total loan book value: $742,674,370 Total value of settlements: $280,920,803 Conversion rate: 92% / Number of loan writers: 5
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Mortgage Choice, Melbourne Total loan book value: $791,167,320 Total value of settlements: $203,193,335 Conversion rate: 63.5% / Number of loan writers: 6
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Better together. Continually improving the experience to make our partnership stronger.
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SPECIAL REPORT BUSINESS STRATEGY
TOP BROKERAGES 2021
CLARITY FINANCIAL GROUP
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or Kristy Edlund, owner-manager of Clarity Financial Group, which moved up from ninth position in the 2020 Top Brokerages list to fifth in 2021, receiving this recognition is “the cherry on top of a tasteless mud cake” after an extremely challenging 12 months. The brokerage increased its total loan book by 12% and settled 18% more loans than the previous year, even with two fewer loan writers. Being based in Canberra, a city of around 400,000 people, makes this even more important for the team. “I think the primary emotion coming from this award is one of pride, in that we overcame, adapted, redesigned processes and essentially just knuckled down together to pull through the year,” says Edlund. COVID-19 had a “galvanising impact” on the team, with everyone pitching in and working through challenges together. Edlund says an upshot of the pandemic is that all the tweaks they made to their processes, enhancements to communication,
Phone: 02 6209 1990 Email: admin@clarityfinancial.com.au Website: clarityfinancial.com.au
revisions to procedures and shifts in thinking are still with them today. Clarity Financial has 17 staff altogether and was established in 2006. One of the core elements of the business is its remuneration model; all brokers are salaried employees who can qualify for bonuses linked to metrics such as compliance, customer satisfaction and production. Over the last 15 years the brokerage has built an enormous client database, which generates a significant portion of its lead flow via repeat business and referrals. During COVID-19 these clients needed clear, accurate information about what they could and could not achieve; Edlund says the management of information was intense and overwhelming at times, but it was imperative to the brokerage’s ability to service its clients. Talking about the company’s learnings over the past 12 months, Edlund says the biggest thing is that “the whole is greater than the sum of its parts”. “Together, as a business of teammates,
we can achieve so much more than we could as individuals,” she says. “And I don’t mean just the traditional sales achievements. I also include the culture and the focus on excellence and continual improvement – all of these facets of our business are strong not because of any one result but because of the team mentality, the team focus and the fact that we all want to be here together, in the trenches, achieving great things together. It’s immensely powerful.”
$1,630,852,349 Total loan book value
$539,383,469
Total settlements from 1 March 2020 to 28 February 2021
$67,422,933
Average settlements per broker
72%
Conversion rate
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SPECIAL REPORT BUSINESS STRATEGY
TOP BROKERAGES 2021
CBA’s Adam Croucher (bottom right) with the winning ALIC team
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THE AUSTRALIAN LENDING & INVESTMENT CENTRE
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aking the number one spot in this year’s Top Brokerages list “does not feel real” for The Australian Lending & Investment Centre (ALIC), says managing director Nate Fosnaugh. Increasing its total loan book value by 9%, the brokerage wrote almost $865m in loans over the 12 months to 28 February 2021 – 26% more than it did the year before. Fosnaugh says it was incredible to even make it through 2020, and with the number and quality of top brokerages continuing to grow, to be at the top of the list “is really special for the team”. ALIC was founded in 2009 by the two current principals who, after more than 45 years combined in the finance sector, believed they could deliver to the market a substantially different offering. That offering focuses not just on product and price but also on education and empowerment of its clients through the top-quality customer experience it provides as well as access to the best professionals. ALIC’s target customers are risk-tolerant clients looking to build wealth by investing in property. Seventy per cent of its business is made up of investment-focused clients, with repeat business coming from 68% of its existing client base. Based in Melbourne CBD, the brokerage generally attracts higher-income clients as well as self-employed professionals. It also meant that the last year presented significantly more challenges than faced by many other brokers.
Phone: +1300 ALIC AU Email: enquiries@alic.com.au Website: alic.com.au
“As with everyone in Victoria, the lockdowns and the wider impact on clients was a substantial impact,” Fosnaugh says. “But the necessity of what it took to get through 2020 has made us a better business in many different ways.” He says the sudden shift to working from home 100% of the time has been a challenge; in particular, hiring and
“What it took to get through 2020 has made us a better business in many different ways” developing new staff with everyone working from home continues to be difficult. “As we all know, to hire and develop a person is a significant investment in time and energy, and we quickly found out, with everyone at home, that the ad hoc development people experience in an office environment was missing,” Fosnaugh says. The brokerage has built in new processes to overcome that, however. Over the last 18 months, a new team structure has been created in which each person has four to six teammates who perform the same role and can share best practices and support with technical questions. ALIC also continued to build a library
of best practice videos and guides so new starters could have a more practical introduction. They watch a video, review the process steps and try to complete the task, and then a senior employee will review their work and provide feedback. As the brokerage continues to grow and progress, it is preparing to move into new office spaces in the Melbourne CBD and will be welcoming a new salaried broker. Fosnaugh expects both the refinancing and purchasing markets to remain strong over the next 12 to 18 months. With the potential of these markets and ALIC’s own recipe for success, the brokerage is going from strength to strength. “Having come from a bank where you have the size and scale to be many things to many people, when you are a small firm, having a targeted customer niche makes success much more likely,” Fosnaugh says.
$2,908,390,058 Total loan book value
$864,838,938
Total settlements from 1 March 2020 to 28 February 2021
$72,069,912
Average settlements per broker
91%
Conversion rate
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PEOPLE
BROKERAGE INSIGHT
Big plans for broking in Beenleigh After a career at a major bank and then in financial planning, Mortgage Choice’s Carly Hookem has landed in mortgage broking and set her sights on helping even more property owners
AFTER SIX YEARS working in financial planning, Carly Hookem decided to take on a broking franchise. She had experience in writing home loans at one of the big four, so she knew it was an area she was happy
a lot of construction and development, the business also sees a lot of tradesmen who are self-employed and rely on one income. The onset of COVID-19 in 2020 resulted in a small drop-off in business as some
“We don’t do a lot of commercial, but we do offer it, and so if we have a client who’s a business owner looking for finance, we are able to help them” working in. Now, three years after buying the Mortgage Choice Beenleigh business, Hookem is enjoying it so much that she has just purchased another franchise in the Redlands, Queensland. The Beenleigh franchise has been in operation since 2004 and has helped more than 1,500 families into properties. Since Hookem took the reins, supported by two other staff – another broker and an admin support person – the business has continued to grow, and she says it “made sense” to expand to a new location. Beenleigh typically provides the brokerage with a customer base of young families, particularly first home buyers. Surrounded by
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customers pulled out of contracts, but with government incentives like JobKeeper, things started to pick up again, Hookem says.
Like most brokerages last year, Mortgage Choice Beenleigh was busy with refinances and restructuring. “Even people who perhaps were in secure jobs and weren’t going to lose them, [COVID] made them start to think, ‘we have two car loans, a home loan and a credit card, and if one of us lost a job we couldn’t afford it’; so we did a lot of restructuring of debts,” Hookem explains. While the brokerage deals mainly in home loans, she says it also offers commercial lending solutions. “I have clients who are business owners, so being able to offer both is a really good way to fence them in and grow the relationship and make them a sticky relationship.
ABOUT MORTGAGE CHOICE BEENLEIGH Since opening in 2004, the brokerage has helped over 1,500 families and individuals from Beenleigh to Jimboomba, Greenbank and surrounds realise their property dreams, says owner-manager Carly Hookem. We understand that no two situations are alike. That’s why we invest time in getting to know you and ensure that we understand your goals. Once we’ve got a grasp of your situation, we compare hundreds of home loan products and work with you to find the one that best suits your needs. Our passion lies in helping you and we specialise in: • • • •
home loans for your owner-occupied or investment property personal loans car loans commercial finance
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BROKERAGE AT A GLANCE Franchise owner: Carly Hookem Location: Beenleigh, Queensland Year Hookem took ownership: 2018
Services: Home loans, car loans, commercial loans Number of employees: 3
“Even people who perhaps were in secure jobs and weren’t going to lose them, [COVID] made them start to think” “If you only offer one [service], you send them away. We don’t do a lot of commercial, but we do offer it, and so if we have a client who’s a business owner looking for finance, we are able to help them.” Hookem is also focusing on setting up and growing her new franchise. As it grows she plans to hire another employee, but she says it can be difficult to find the right support staff.
Thankfully, Mortgage Choice has provided support where Hookem has needed it, particularly by sending over leads every day and giving her access to technology and digital tools. The brand awareness the Mortgage Choice name brings helps as well, which is why Hookem initially decided to buy the franchise. In the industry more widely, Hookem has noticed people paying more for properties just
to get into the housing market, which is pricing many would-be buyers out; and interstate buyers are also pushing up prices. “We have got people with pre-approvals but they can’t get a property,” she says. As a mother of three, Hookem enjoys the flexibility that mortgage broking offers. Originally in home lending at a major bank and studying financial planning at the same time, she had no such flexibility. When she moved on to a role in financial planning, which she had always wanted to do, it was a little more flexible. But now that Hookem is working from home two days a week, the flexibility of being a mortgage broker allows her to look after her children and take them away during the school holidays. She says being a broker is hard work – and a lot of hard work – but she can choose when she does it. She wakes up a couple of hours before her children, takes them to school and will work at night after they have gone to bed. “It just allows you to take on as little or as much as you want to do,” Hookem says. “I don’t want to do full-time hours. I still answer my phone and send emails, but I’m not working all the time, so it feels like I’ve got a good work-life balance. This gave me the flexibility to work around the kids.”
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PEOPLE
OTHER LIFE
TELL US WHAT YOU GET UP TO Email rebecca.pike@keymedia.com
“Whether it’s in the su nshine or the water, laughing with friends, having a ru n or kicking a ball, a ny activity is good for you”
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Years since Brett Foster started coaching
3–4
Number of times a week he goes to the gym
10
Youngest age of children Foster coaches to run
HIGH FIVES ALL ROUND Dad and broker Brett Foster fits AFL coaching around his client meetings AS AN active parent of three, Liberty Network Services adviser Brett Foster wanted to be involved in his kids’ sporting activities. He put his hand up to help, and now, when he’s not meeting with his customers, he takes time out to coach his son’s Year 10 boys’ and his daughter’s Year 11/12 girls’ AFL teams.
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Foster is also a strength and conditioning coach for the local Little Athletics club, running programs and training for children aged between 10 and 17. He says he loves to see children and young adults develop, not only in sport but personally too. “I really believe that sport is a great
way for kids to exercise and challenge themselves,” Foster says. “Whether it’s helping them achieve a personal best at running, in Little Athletics or just kicking a goal in footy, the sense of being part of something keeps me coming back. It’s the high fives and smiles that make it worthwhile.”
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