Australian Broker 15.21

NOVEMBER 2018 ISSUE 15.21

PROSPA The online lender’s GM for sales and business development, Matt Bauld, discusses the future of business lending in an exclusive roundtable with leading brokers and the MFAA /14

Celebrating the best of broking All the action from the Australian Mortgage Awards /20

The personal touch How a new lender will deliver tailored interest rates /26

Counting the cost The latest market snapshot from Canberra /30

In the hot seat Mint Equity’s Preeti Kowshik on building respectful relationships /34

NEWS

IN THIS SECTION

Lenders Brokers help Liberty to grow loan book /04

Associations International Mortgage Brokers Federation launched /06

Technology New spare change tool to boost mortgage repayments /10

Regulators MyState calls for more regulation during AGM /12

Market More homeowners holding less equity /08

www.brokernews.com.au NOVEMBER 2O18 EDITORIAL

SALES & MARKETING

News Editor Rebecca Pike

Sales Manager Simon Kerslake

Production Editor Roslyn Meredith

DATES TO WATCH

ART & PRODUCTION

Upcoming can’t-miss events

Designer Martin Cosme Production Manager Alicia Chin

1 6 N O V E M B E R

1 9 N O V E M B E R

FBAA 2018 National Industry Conference

Australian Property Market update

The FBAA’s annual conference and awards will be held at Sea World on the Gold Coast.

Under the theme ‘Evolution’, the conference will support brokers in navigating recent industry changes, while the evening’s Awards of Supremacy will see 500 guests gather to recognise leading industry personalities.

This introduction to Blue Wealth’s operations, scope and insight also provides wider analysis of the property market and where new investment opportunities can be found. The event is positioned for existing and new Blue Wealth clients as well as brokers, and will cover property as a wealth creation tool.

20 NOVEMBER CEDA annual dinner Held at the Sofitel Melbourne, the committee’s end-of-year celebration will welcome Reserve Bank Governor Philip Lowe as keynote speaker. He will deliver a review of the past year and also share his economic predictions for 2019. Individual member tickets start at $290, while non-member tables can be purchased for $4,000.

Traffic Coordinator Freya Demegilio

Marketing and Communications Manager Michelle Lam

CORPORATE Chief Executive Officer Mike Shipley Chief Operating Officer George Walmsley Managing Director Justin Kennedy Publisher Simon Kerslake Chief Information Officer Colin Chan Human Resources Manager Julia Bookallil

EDITORIAL ENQUIRIES

Rebecca Pike +61 2 8437 4784 Rebecca.Pike@keymedia.com

SUBSCRIPTION ENQUIRIES

2 3 N O V E M B E R

23 – 25

NOVEMBER

3 – 4 D E C E M B E R

MFAA annual golf day

Self Managed Super Fund Expo

Women in Leadership Summit

The MFAA will host a day of golf and networking at the Wembley Golf Course, WA, followed by the traditional end-of-year sundowners. There will be prizes on the day as well as competition holes and activities, including Longest Drive and Nearest the Pin – and mini golf for those who don’t want to play a full 18 holes.

The SMSF expo is a platform for consumers and finance professionals to compare products and services, meet like-minded individuals and source expert information. The agenda includes free-to-attend seminars led by industry experts, and one-on-one consultations with exhibitors. The event offers a vast range of financial information, technical know-how, and SMSF expertise.

This is a global gathering of women in leadership who have made a difference in their businesses and communities. The Perth edition is followed by eight further gatherings in Auckland, Hong Kong, Singapore, the UK and US. The event focuses on diversity in the workplace and leadership techniques.

tel: +61 2 8O11 4992 fax: +61 2 9439 4599 subscriptions@keymedia.com.au

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5 & 13 DECEMBER

7 D E C E M B E R

Vow Financial webinars

FBAA Social Melbourne

Vow’s last webinar sessions of 2018 will take place in December. Covering the latest professional development topics, they will cap off a year-long program that has seen such partners as Suncorp and NAB deliver sessions and updates on key topics.

Registration starts at 8.45am and the summit will commence at 9am. Morning tea will be provided and the event is due to conclude at 12.30pm. The Melbourne social will be preceded by a Sydney event on 30 November. Further details of both events are available on the FBAA website.

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4 – 5 MARCH Responsible Lending and Borrowing Summit Informa’s third responsible lending summit will welcome ABA director Christine Cupitt, Ombudsman Philip Field and ANZ customer advocate Jo McKinstray to an open forum reflecting on lessons learned from the royal commission, and exploring the opportunities to improve the industry for the future.

This magazine is printed on paper produced from 1OO% sustainable forestry, grown and managed specifically for the paper pulp industry Copyright is reserved throughout. No part of this publication can be reproduced in whole or part without the express permission of the editor. Contributions are invited, but copies of work should be kept, as Australian Broker magazine can accept no responsibility for loss. Australian Broker is the most-often read industry publication, according to independent research carried out by the Ehrenberg-Bass Institute for Marketing Science at the University of South Australia in December 2008. The research also found that brokers rate Australian Broker as the best for both news content and feature articles, followed by sister publication MPA. Overall, on all categories, Australian Broker ranks top followed by MPA. The results were based on a sample of 405 respondents who were the subject of telephone interviews.

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NEWS

LENDERS MUTUAL BANK’S PROFITS UP 12% its financial results for the last year, Newcastle Permanent reported a 12.4% increase in net profit after tax and home loan portfolio growth of 4.4% to $8.9bn in value.

Further, Roy Morgan ranked the lender first place for customer satisfaction. The bank’s CEO, Terry Millett, said, “Where the major banks are sitting round in Parliament and pontificating about all these things they have done wrong, people like us are motoring away.”

HOME LENDING FALLS Source: ABS, CommSec

Total housing finance commitments – owner-occupiers Annual percentage change

IN

20%

10%

0%

-10% 7.5-year low -20%

PEPPER EXTENDS FOOTBALL PARTNERSHIP has extended its partnership with St Kilda Football Club to the 2020 season, meaning that if a Saints supporter takes out a Pepper Money home, car or personal loan, Pepper will pay for their membership for every year of the partnership. This also applies to Saints supporters who are already Pepper Money customers. Pepper CMO Jo Thrift said, “Pepper and the Saints are here to play the long game.”

PEPPER MONEY

“Some commentators talk about non-bank lenders as if we are competing for the scraps at the lower end of the market” Kim Cannon Managing director, Firstmac

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-30% Jan 2010

Jan 2012

Jan 2014

Jan 2016

BROKERS HELP LIBERTY TO GROW LOAN BOOK Loan originations up 15% due the group’s acquisitions and investments, as well as brokers leveraging the shift to non-bank lenders lender Liberty saw a 15% increase in loan originations in the last financial year, which the group attributes to its brokers.

The lender’s chief executive, James Boyle, said more and more customers, who at one point would have been customers of a bank, are now turning to Liberty, thanks to the alternative solutions from the non-bank’s extended product suite that are presented to them by brokers.

Boyle said, “Liberty’s broking partners were essential to the success of our business last year and responsible for delivering $4.9bn in new loans across home, motor and commercial.

This included an increase of SPECIALIST

59% for new commercial loans and a 17% increase in new motor vehicle loans.”

During the 2017/18 financial year, brokers were able to offer a broader range of solutions following Liberty’s acquisition of MoneyPlace in January and National Mortgage Brokers in August, as well as its investment in ALI Group.

Further supporting brokers in diversifying, this year Liberty also introduced a new deal to help customers looking to buy or refinance a car, dropping the rate on its prime Liberty Drive car loan product by 1% throughout the month of August.

However, looking ahead Boyle expects the current environment of uncertainty to continue as the

Jan 2018

industry awaits the royal commission’s final report. He said, “I can’t imagine [Hayne] will not consider the impact of any recommendations on the mortgage broking community, because it’s so important for managing competition.”

As a member of the Combined Industry Forum, the non-bank said it was clear in its support of the broking industry.

To brokers worried about the future, Boyle said: “Undeniably, community expectation of our services has increased. So it doesn’t matter if you were already doing good things; it’s the right time for us to be reflecting on how we do what we do for customers even better.

“I think other than that we should be confident that there’s a good reason more than half of home loan borrowers in Australia seek out a mortgage broker.

The service we provide is really important and really relevant, and that’s unlikely to change.”

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NEWS

A S S O C I AT I O N S BROKER ORIGINATIONS CONTINUE TO CLIMB CEO Mike Felton has congratulated brokers on achieving a new six-year high for originations after settling 53.9% of all new residential home loans during the June 2018 quarter.

This equates to $49.5bn in residential loans, and marks an increase of 2.8% year-on-year.

Commenting on the data from CoreLogic’s comparator, Felton said, “This result is a triumph for our members whose exemplary work has risen above current scrutiny.”

MFAA

CAFBA ISSUES CYBERCRIME WARNING Commercial and Asset Finance Brokers Association (CAFBA) has issued a cybercrime warning to its members.

One area of focus for criminals is business email compromise through the use of phishing emails specifically targeted at SMEs, which caused losses of $20m between 2016 and 2017. CAFBA’s statement quoted Cyber Security Minister Dan Tehan as saying, “The days of cyber threats being deployed by a hooded computer geek in a basement are over”.

THE

Peter White, executive dirctor, FBAA

INTERNATIONAL MORTGAGE BROKERS FEDERATION LAUNCHED IN CANADA The FBAA’s Peter White confirms the launch of a new international federation of brokers, pioneered by the Australian association world-first international federation of mortgage brokers has been launched in Canada. The new International Mortgage Brokers Federation (IMBF) is an initiative of the Canadian Mortgage Brokers Association (CMBA) and the FBAA. FBAA executive director Peter White said the planning started for an international body two years ago and, now live, the federation will represent all mortgage and finance brokers.

He said, “I was doing the FBAA’s global research paper in 2016 after discovering that Canada was also looking at establishing a collaborative international group of finance brokers.

“One of the catalysts for creating A

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the federation was the realisation that finance regulators in each country had been talking to each other and sharing knowledge and regulatory outcomes, and we felt we would benefit tremendously by doing the same thing.”

From there, the FBAA worked with the CMBA to form the new federation on a platform of sharing ideas, referring clients, gathering market intelligence, identifying trends, and keeping up to date on regulatory matters and industry best practice.

“From today the IMBF is the leading global forum for bringing the international mortgage broking community and its suppliers together to collaborate,” White said.

Beyond this collaboration, the

federation will become a strong body to influence regulation and legislation through global advocacy.

White said the organisation’s aim was also to develop and adapt new and existing standards that enhance the industry and promote strong ethical practices by its members.

The federation creates the first global referral network that allows brokers to refer clients overseas if they move yet still stay in contact with them through the new relationships.

The composition of the federation is one association per country and includes Canada, Australia, the USA, New Zealand, and the UK. Other countries that use third party origination networks to distribute loan products have been invited to join.

A board of governors has been established, and the executive team will be announced over the coming weeks.

See the next issue of Australian Broker for more on this story.

“June and July were record settlement months – not just for the year but in our history.

This success all comes down to our members” Anja Pannek CEO, PLAN Australia

www.brokernews.com.au

7

NEWS

MARKET BRANDED RESIDENCES COULD FETCH 35% PREMIUM residences could generate premium prices that are 25–35% above those of non-branded residences, according to Erin van Tuil, director at Knight Frank. Hotel branded residences are present in more than 180 locations across 64 countries globally, and usually follow an influx of high-net-worth individuals – 10,000 arrive in Australia annually.

The insight follows the launch of Crown Residences in Sydney, Australia’s first fully integrated, six-star hotel branded residences.

BRANDED

INDONESIAN BANKERS STUDY LOCAL MARKET Market has hosted a study tour for Indonesian bankers following the introduction of brokers at Loan Market Indonesia. The group discussed the broker market with Loan Market Australia’s Sam White, and also met with Pepper Money to find out more about non-conforming lending in Australia. The CEO of Loan Market Indonesia, Sari Dewi, said, “I think we have learned a lot.

We learned about regulation, and I now better understand the banking system here.”

LOAN

“Through the Heritage Bank foundation, we are establishing a tangible mechanism that will ensure we continue to build on the legacy we have created” Kerry Betros Chairman, Heritage Bank

MORE AUSTRALIAN HOMEOWNERS HOLDING LESS EQUITY At 16.5%, WA has the highest proportion of mortgage customers with no real equity in their homes, up 2.5% over the last 12 months mortgage holders in Australia have little or no equity in their homes compared to a year ago, according to figures released in Roy Morgan’s Single Source Survey.

The data confirms a current figure of 8.9%, up from 8% a year ago, which could continue to rise if house prices keep falling. Around 386,000 homeowners across the country were found to have little or no equity in their homes.

The data is derived from more than 50,000 Australian borrowers, including over 10,000 owneroccupier homeowners.

The figures are based on the fact that the value of their homes is only equal to or less than the amount they still owe, with risk unevenly MORE

distributed between states.

In the highest-risk state, WA, 16.5% of mortgage customers – or 90,000 – have no real equity in their homes, representing an increase of 2.5% in the last 12 months.

NSW is the state with the lowest proportion of homeowners who have little or no equity in their homes, at only 6.1%.

Victoria is the second-best performer, followed by Tasmania, Queensland and South Australia.

Roy Morgan said the strong performance in NSW and Victoria was down to the rapid rise in Sydney and Melbourne prices, which outpaced the amount owing on mortgages.

Norman Morris, industry

communications director at Roy Morgan, said, “Other potential contributing factors to this increase in mortgage stress include borrowers maintaining debt for other purposes rather than paying off their loan, and the use of interest-only loans.

“If home loan rates rise, the problem would be likely to worsen as repayments would increase and house prices decline, with the potential to lower equity even further. If house prices decline further in WA and unemployment increases, then more mortgage holders will be facing a tough situation,” he added.

“Borrowers in lower-value homes continue to be among the most likely to be faced with the problem of little or no equity.

Higher-value mortgaged properties appear to be facing a much less risky position because they are likely to have had their loan longer and may have had a far larger deposit, particularly if they have traded up.”

LENDING TOPS OUT Source: ABS, CommSec

Total finance commitments trend: Housing, personal, commercial and lease, $bn $80 $75 $70 $65 $60 $55 $50 $45 $40 Jan 2006

8

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Jan 2008

Jan 2010

Jan 2012

Jan 2014

Jan 2016

Jan 2018

TECHNOLOGY UPDATE

HOUSEHOLD MORTGAGE PREPAYMENTS Source: CommSec

Aggregate Share of housing credit (RHS)

APPLYONLINE VARIATIONS: EMPOWERING AND REWARDING BROKERS AND LENDERS

Months

Number of months (LHS)

36

36%

24

24%

12

12%

0

0% 2010

2014

2018

Distribution of loans by months of prepayments Investor and/or fixed rate loans New loans

Other

Tony Carn

36%

24%

12%

0% 0–1

1–6

6–12

12–24

24+

Months

STRONG DEPOSIT BONDS A MUST Australian deposit bond provider has urged brokers, conveyancers and real estate agents to question the strength of deposit bonds if they want to protect their clients. Etienne Rizzo, director of Deposit Assure, said, “Look for A+ stable from a reputable credit rating agency, such as Standard & Poor’s and Moody’s. An increasing number of property contracts stipulate the use of a deposit bond provider with an Australian-based underwriter, regulated by APRA. This provides another level of comfort to vendors and purchasers alike.” He also advised that the underwriter should be based in Australia.

AN

variations for existing customers are seeing a strong take-up using a standardised approach in the NextGen.Net platform ApplyOnline.

This capability was implemented by a number of lenders in recent years to empower brokers to better service their mutual customers. The ApplyOnline Variations application (which replicates the service for new loans) also enables lenders to capitalise on the platform’s compliance capabilities.

The ApplyOnline ‘compliance tab’ leverages a dynamic rule base, supplying requirements and objectives questions for brokers to pose to borrowers for variations. This ensures the same level of due diligence for loan variations as is applied for new-to-bank customers.

Ensuring ease and efficiency, and a standardised method of facilitating variations to current home loans, ApplyOnline Variations enables brokers to easily attend to customer requirements on an ongoing basis.

Empowering brokers to manage variations for customers through ApplyOnline puts the lender at a greater advantage by ensuring borrower requirements and objectives are clearly understood, as well as ensuring better loan retention rates.

“Compliance and the emergence of responsible lending are now key components in lender retention strategies,” says NextGen.Net Sales Director Tony Carn.

“There are many components under the banner of responsible lending, one of which is accurately capturing living expenses. Having a standardised application process for variations ensures that due diligence is comprehensive irrespective of the transaction type,” says Carn.

Currently, variations often involve a manual process, including customers LOAN

needing to visit a bank branch, being referred to a bank call centre, or selfservice for certain types of transactions.

“Brokers are typically best-in-class at looking after customers’ needs on an ongoing basis. Those lenders that have already enabled an ApplyOnline Variations application are providing the tools to ensure brokers are front and centre in managing these activities,” says Carn.

By making the process simple for the broker to assist existing customers, the lender is also addressing the importance of customer retention and maintaining above-systems book growth.

“Being able to do variations through ApplyOnline, using a strikingly similar process to new customers, makes the whole exercise very easy, efficient, and the ‘critical factor’ – ensuring the requirements and objectives of the customer are met,” says Carn.

ApplyOnline Variations is another way that brokers and lenders can maximise their use of the ApplyOnline platform.

It improves the quality of submissions, which benefits the whole industry chain – lenders, brokers and borrowers.

“Given the current landscape of the Australian mortgage market, the need to give brokers the tools to better manage customers on an ongoing basis has never been more relevant. This takes the issue of variations right to the top of the priorities list for lenders and brokers alike,” says Carn.

“The visionary lenders that have pioneered customer variations in this space have not only demonstrated their commitment to third party distribution, but have also assisted in clearing a path for the broader industry to adopt a standardised best practice approach.

“The bottom line is that brokers are looking for lenders to properly empower them to manage customers into the future.”

www.brokernews.com.au

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NEWS

TECHNOLOGY

ONLINE LENDER LOOKING TO REFINANCE IN 15 MINS Home Loans chief marketing officer Natalie Dinsdale has revealed during Ashurt’s Fintech Summit that the online lender hopes to offer mortgage refinancing within 15 minutes of application. She said, “What open banking is going to do is create more transparency so consumers have more choice.

We’re going to be the first digital cloud-based platform. The pace [at which] we can react to consumer feedback and find bugs will be tenfold compared to the banks.”

ATHENA

SPARE CHANGE TOOL LAUNCHED TO BOOST MORTGAGE REPAYMENTS The tool, developed and launched by ING, rounds up card payments and allocates spare change to additional repayments has launched Everyday Round Up for Home Loans, a digital tool to enable its customers to round up the loose change from their card purchases to pay down their ING mortgages.

The tool was launched as research from the bank showed that 40% of mortgage borrowers fear they will carry their mortgage into retirement.

The research also suggested that borrowers are so eager to stay a step ahead of their mortgage repayments that 82% are paying down more than required most years, and 45% expect to pay off their mortgages at least five years early.

With the new product, card purchases made through ING’s

Orange Everyday account are rounded up to the nearest $1 or $5.

The difference between the cost of the purchase and the rounded amount is then automatically shifted from the customer’s Orange Everyday account to pay down the mortgage.

It follows the introduction of Everyday Round Up for savings, which debuted in 2017. The optional tool is available to all Orange Everyday account holders and applies to offline and online transactions, including Visa payWave, Apple Pay and Google Pay. A round-up will not be debited if it would reduce the account balance to less than $20.

Other budgeting apps, such as Raiz, have similar principles, but

ING

Round Up is specifically designed to help pay off home loans.

ING’s head of retail banking, Melanie Evans, said, “Everyday Round Up for Home Loans is about helping our customers to stay a step ahead by enabling them to use their small change to pay off their biggest purchase – their home.

“We launched Everyday Round Up a year ago to help Aussies round up their loose change into a savings account where it would earn interest. In less than a year we’ve helped over 160,000 customers collectively save $32m.”

ING estimates that customers who round up $50 each month to their 30-year owner-occupier Mortgage Simplifier mortgage of $350,000 could shave 19 months off the term or save $14,000 in interest simply by rounding up their loose change. This assumes the customer puts down a 20% deposit and makes principal and interest repayments.

FINTECH’S RECORD RESULTS Source: KPMG

Global fintech investment activity (VE, PE and M&A) $35

500 400

$0

$26.1 $12.4

$11.8

$9.6

$14.2

300 200 150

$4.3

$14.0

$25.0 $8.1

$14.0 $8.7

$6.0

$3.1

$2.9

$7.4

www.brokernews.com.au

2013

350 250

100 50

1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 2012

10

$1.7

$3.1

$1.6

$3.0

$1.2

$10 $5

$8.6

$15

$11.9

$20

$15.5

$31.7

Deal value ($bn) $15.4

$25

450

$6.6

$30

Number of deals closed

2014

2015

2016

2017

2018

0

NEW TOOL EDUCATES BORROWERS ON RISK Finance has developed a new tool to educate Australians on their financial risk. Called MoneyBRAINS, the automated online tool provides borrowers with instant insights into their household finances and risk position, as well as available options.

Director at Confidence Finance Redom Syed said, “People often see what’s in front of them, and what they see is what they know, but they’re not really prepared for what lies ahead and the unknown.”

CONFIDENCE

ASIC WEBINAR TO TACKLE FINTECH REGULATIONS Innovation Hub will return on 8 November with a session dedicated to supporting fintech and regtech start-ups in navigating the regulatory framework. The session, worth one CPD hour, will be hosted by Mark Adams, ASIC’s senior executive leader of strategic intelligence. In 2016, ASIC expanded its focus to include regtech and has recently been provided with $6m in funding over the next two financial years. Attendees can register via the ASIC Innovation Hub website.

ASIC’S

FINTECH LENDER JOINS BROKER PANEL lender MoneyPlace, part of the Liberty group of companies, has been added to Mortgage Choice’s panel of more than 20 lenders. Mortgage Choice CEO Susan Mitchell said the addition was a logical choice. “Over the last 18 months, we have seen a strong growth in the uptake of personal loans and have identified an opportunity for our broker network to provide risk-based loan pricing to creditworthy customers,” she added.

FINTECH

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NEWS

R E G U L AT O R S

Sam White

‘STAY AWESOME,’ EXEC TELLS BROKERS executive chairman Sam White has told brokers to “keep being awesome” in the wake of the royal commission. Acknowledging “anxiety and concern” in the industry at the moment, White held a digital discussion with brokers to answer questions and try to provide advice. He said, “It’s easy to lose energy in this market, and it can be hard. Keep being awesome with your customers – that doesn’t change.”

LOAN MARKET

MYSTATE CALLS FOR MORE REGULATION TO REDUCE ADVANTAGE OF BIGGER BANKS Second-tier bank calls for government and regulators to “level the playing field” with the larger institutions chairman Miles Hampton has said more regulation is needed to reduce the advantage enjoyed by the bigger banks.

Speaking at the lender’s recent AGM, Hampton and managing director Melos Sulicich called for the federal government and regulators to take action to “level the playing field”.

At the meeting, MyState reported a net profit after tax of $31.5m for the year, up 4.6% on the previous year. The group said that, while this was a strong result, the lender was “unfairly constrained by regulations that benefit larger banks”.

Hampton said the Productivity Commission report released in August had noted that regulatory emphasis on larger banks being “unquestionably strong” at the MYSTATE

RATINGS AGENCY WARNS OF FRAUD RISK a report discussing the decline of LMI in residential mortgage-backed securities, S&P Global Ratings has said broker channel growth is an area of potential risk when it comes to verifying expenses. The agency expects to see an increased regulatory focus on the verification processes lenders use. The report continued to say that third parties providing borrower information to lenders required the presence of procedures to verify the “accuracy and completeness of the information”.

IN

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expense of competition was not serving the consumer well.

“The Productivity Commission observed that larger financial institutions have the ability to exercise market power to the disadvantage of consumers,” he said.

“Part of that ability stems from the regulatory requirements placed on smaller banks, which inhibit our ability to compete effectively with the larger players.”

Sulicich welcomed the Productivity Commission’s finding that the larger banks gained an unfair funding advantage from their ‘too big to fail’ status, combined with capital benefit from advanced accreditation.

“Consumers are demanding the competition that smaller banks provide, but we are hobbled by

capital constraints which let larger banks lend much more with the same capital. We urge the government to increase the average mortgage risk weights which govern larger banks’ reserves to reduce their lending advantage.”

He said wholesale funding markets were tightening due to the bank bill swap rate currently trading at significantly elevated rates compared to historical levels.

“While wholesale costs are higher, larger banks benefit from issuer credit ratings that recognise an implicit government guarantee which enables access to funding at lower cost, increasing their advantage,” he said.

“Although our result shows we are well placed to adapt to competitive challenges, we believe we are unfairly constrained by regulations that benefit larger banks.

“We want to compete and provide much-needed competition in the Australian banking landscape.

We are simply asking for a more level playing field.”

30/06/2003

COMMERCIAL LENDING BY BROKERS Source: Deloitte Access Economics 2017

Distribution of commercial loans settled by brokers 2016–17 60%

48% 50% 40%

37%

30% 20%

9%

10%

3%

2%

1%

11–20

21–40

>40

0%

0

1–5

6–10

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13

RO UND TA BL E

FINTECH ROUNDTABLE

THE REINVENTION OF BUSINESS LENDING The banks may be playing hardball, but a new generation of fintechs are keeping capital flowing to Australia’s small and medium-sized businesses.

Prospa’s Matt Bauld and Alex Brgudac sat down with the MFAA and four leading brokers to debate the trends and examine the future of fintech lending

Brokers, what was the pivotal moment that inspired you to diversify into commercial and business lending and what do you think is preventing the large majority of brokers from doing the same?

Josh Ugo: For us there were two main reasons. Firstly, to add more value to our customers and, secondly, to create more opportunities for us. And because we took the step to understand the product, we went from being reactive to proactive, and then we were finding the opportunities. They were always there.

Mhairi MacLeod: Originally, my business specialised across asset and commercial lending and I have diversified a lot further in 20 years by picking up niche customer segments.

This has given me an even broader diversification and today my staff and I collaborate to find new market and customer niches, and we do that every year. I think brokers like us who are always forward-thinking are always going to be looking for the next thing that is going to assist our clients, which will open the market to diversification.

Rob Grul : Simply because the need was there. Around 50–60% of what we do is some form of capital raising for business. Whether we can raise money off the balance sheet or we can utilise cash flow products, our customers were screaming for cash flow and we, like all good brokers, needed to find solutions. This was a happy marriage between our firm’s operations and customers’ needs.

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Steve Sladek: For us it was a simple transition. Originally we provided consultancy, helping troubled and distressed entities. The other part

get a very good understanding of a customer’s business and you uncover these other needs. Doing business consultancy, asset finance and now

“Close to 70% of our business comes from intermediary partners and we have always understood that we need to help our partners find customers efficiently” Matt Bauld, GM for sales and business development, Prospa of the business was asset finance, equipment and so on. It’s about getting to know your customer and, for us, doing consultancy as well as asset finance, we need to see full financials for the last few years, balance sheet, etc. Through that you

business loans, all three work really well together.

What are the challenges in diversifying sources of business?

Rob Grul: Education. I was lucky enough to have an experienced Prospa BDM come into my office, sit down and educate me on how to do it. Traditionally, we have always offered a secured funding type of arrangement for our customers, whether that is leaseback or debtor finance, but someone from Prospa came and spent time with me to explain how these products fit clients.

Mhairi MacLeod: A lot of resi brokers are unable to articulate what products such as Prospa’s small business loan actually do, or they are fearful because they think it’s expensive. If someone could teach them, through a narrative, it would help them.

Stephen Hale: The skills gap and lack of experience are the main barriers we hear about at MFAA.

NUMBER OF BROKERS WRITING COMMERCIAL LENDING BY STATE Source: CoreLogic

NSW and ACT

1,200

Victoria

Queensland

Western Australia

1,121

1,000

894

400 200 0

1,028

779

800 600

South Australia

706 537

697

532

452

461 278

274

250

410 341

224

128

121

Apr 15–Sep 15

Oct 15–Mar 16

187

Apr 16–Sep 16

830

774

719

512

579 497 366

348 206

231

Oct 16–Mar 17

Apr 17–Sep 17

269

Oct 17–Mar 18

In partnership with

ROUNDTABLE PARTICIPANTS

Matt Bauld GM for sales and business development, Prospa

Stephen Hale Head of marketing and communication, MFAA

Matt Bauld

But the fintech sector is filling the gap with the products on offer and the speed to market that they can facilitate.

How are brokers being supported in order to meet these challenges?

Matt Bauld: Close to 70% of Prospa’s business comes from intermediary partners, and we have always understood that we need to help our partners find customers efficiently and then provide the best service possible. We regularly approach the market to ask how we can help and then respond, which has built our product, technology and trust. We have worked with more than 10,000 partners to do that; we are on aggregator panels and we work with associations. The amazing experience we deliver for customers is evidenced by our NPS, which is in excess of +77, and our industryleading TrustPilot rating.

Looking at the number of brokers who work beyond residential, what does the data say?

Stephen Hale: There has been a 25% increase in residential brokers writing commercial loans in the last quarter, and they wrote around $9bn in the first half of 2018. As an association, when the MFAA talks to brokers we see many start as residential brokers, and the tech-based commercial lenders such as Prospa provide a really good way for them to get into a new customer base. Because commercial

is more complex than residential it’s a big challenge to step straight into.

Starting with small business loans is a great way to learn your client’s needs and then look at whether it’s right for you as a broker. We don’t say it’s right for every broker, but many brokers have that ability to diversify.

and ensure customers know there are options. Consideration was sub-5% a couple of years ago and now it’s reaching the low twenties. So that education is critical.

To the non-brokers, what challenges do you see for those who don’t diversify?

Josh Ugo: Aggregators host conferences with great content and they can make a broker aware of what is available productwise, but they may not be focused on educating brokers on the mechanics of reaching a larger market.

Matt Bauld: Prospa has seen the greatest challenge as the question of ‘what happens when...?’ That means, if you specialise in only one thing, when the customer comes to you with a different requirement, how do you meet it?

Stephen Hale: And if you want to keep that relationship you have to

What should the role of an aggregator be in helping brokers to diversify?

Mhairi MacLeod: Back-end collaboration between the aggregators, brokers, and lenders needs to be tighter. But I think the role aggregators could play at PD days is in encouraging peer-to-peer

“There has been a 25% increase in residential brokers writing commercial loans in the last quarter” Stephen Hale, head of marketing and communication, MFAA find a solution or the customer will go elsewhere.

Matt Bauld: The biggest challenges for Prospa as a lender are increasing awareness and then consideration.

Most small business owners aren’t aware of and don’t understand their options. Prospa is now in its sixth year and we are investing a huge amount in education to increase awareness

partnerships, for example pairing brokers who have used Prospa with those who haven’t. The two can assist each other with the first few deals and then choose if they want to do the next one alone or with more support.

Alex Brgudac: As a lender, Prospa has had a tremendous amount of success with our partnerships, not just with aggregators but with

Alex Brgudac Head of partnerships, Prospa

Mhairi MacLeod Founder and principal, Astute Ability Group

Rob Grul Broker manager, G&H Financial

Josh Ugo Director, Finicky Finance

Steve Sladek MD, Agility Finance Services

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RO UND TA BL E

a solution, but we also bring them a get-out. We show them they are going to pay this loan off; it’s not an evergreen facility that is going to get them into financial difficulty. They have an end result and a solution. It’s a continuous example of what we do as brokers, which is educating our SME clients on how to use a product.

Matt Bauld: In Prospa’s experience, customers want to be heard. They actually want to have a conversation about the business and they want someone to understand what the business is about. Working with our partners and working alongside the business owners, we can do that.

key industry associations as well.

Ultimately, we are a commercial lender, but we are about helping brokers of all sorts of backgrounds and specialties, be they residential, commercial or asset finance – all they need is access to small businesses. I am pleased to say that all partnerships we have across the industry have really embraced our approach and opened up the flood gates in terms of giving us opportunities to help drive awareness and education through to the broker base. Reflecting the recent MFAA data, we are also seeing an uplifting in new broker business, which means diversification is absolutely growing.

a bit of an education process.

What features do SME owners want in their loans?

Mhairi MacLeod: We bring them

Steve Sladek: Fast turnaround times. We deal fundamentally with small businesses, and you usually find the owner-operator of a business is very engaged with the operations, and they know they need funding but, until we come on and provide service, it’s left until the last minute. What we find from a business consulting point of view is that SMEs can be very lastminute, and when they decide they need finance they need you to make it happen fast. So timing is everything.

Rate, too, to a certain extent. They do want bank rates, but we explain that it’s just not always doable. So there is 16

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Mhairi MacLeod: Education is key.

I educate my clients on the products and services as well as the solutions they are designed to provide.

Rob Grul: Small businesses are looking for approvals. When you’re talking about a business with a turnover of less than $50m, or even $20m, unless there is a copy of security they’re not getting access to funds. So probably the demands aren’t as rate-focused as some brokers expect, but I think it’s the ability to get money, and unless you’re a specialist, and we all are, customers just don’t know how to access funds.

Alex Brgudac: Speed, service and price. You never hear a broker saying “I have a small business in need of funds but have a few weeks before they need it!” Small business owners wake up in the morning and go to bed at night thinking about the cash flow in their business. Even using technology, it’s also about how to educate the SMEs on what is possible if funds were available to them.

In terms of the availability of capital, what is possible in the current lending environment?

Stephen Hale: There is a tightening of credit policy at the moment, and that is worrying a lot of SMEs and commentators. Brokers must continue to provide access to new forms of lending. They have that source and access to relationships that can help SMEs, and as an association we see fast growth in the fintech sector, and fintechs filling the gap where there is a credit squeeze starting to happen.

Rob Grul: I think the banks actually created this market. Previously, a business owner saw their bank manager, did the deal and everyone was happy. But banks, in tightening up, created this market themselves – it didn’t just appear. People realised they needed options, and fintech is a perfectly viable option for the customer at this time.

Matt Bauld: I think the great opportunity here for the broker is that they, too, are a business owner, so the opportunity is right in front of them. It’s not just about solving problems; it’s about the massive opportunity in the SME market and how you as the broker grow within the financial opportunities in front of you. The more regularly you can speak to business clients, the more opportunity you will see exists.

Are brokers apprehensive about fintechs and online lenders?

Josh Ugo: When I first started working with Prospa I was extremely hesitant because they had direct contact with my customer. But the first few deals went really smoothly and the customer had a good experience, so now that fear has gone.

Stephen Hale: Ownership of the client relationship is a big fear for brokers. A lot of people came into the tech lending market thinking, ‘we’re cool, we’re online, we don’t wear ties’, but brokers were hesitant because, firstly, they didn’t know how to sell the product and, secondly, they were fearful of the client being taken from them.

Brokers said to the MFAA years

4,000 NUMBER OF BROKERS WRITING COMMERCIAL LENDING – TOTAL Source: CoreLogic

3,668

4,000 3,500 3,000

2,374

2,500 2,000

1,673

1,641

Apr 15–Sep 15

Oct 15–Mar 16

2,647

2,932

1,500 1,000 500 0

Apr 16–Sep 16

Oct 16–Mar 17

Apr 17–Sep 17

Oct 17–Mar 18

In partnership with

ago: what if these lenders go into mortgages and take the whole client’s business away from us?

Alex Brgudac: I think that one of our biggest obstacles in the early days, and to some extent still today, is having brokers trust a lender to speak to a client. It’s a big deal. Your client is everything, and historically brokers would go out of their way to ensure the lender never had that contact.

Matt Bauld: One of the big changes Prospa has made over the journey is our value proposition as a fintech and how fast we can do things; that’s a real talking point for our team.

Yes, introduce your customer and we will do the work – that is one of our processes and we can do that.

But at the same time, for the broker market we can deliver a service that is absolutely about working with partners to get the full application and submission done through the broker. We also offer valuable services to our partners, such as partnerbranded marketing support, to help them service their customers best.

Steve Sladek: If you have a client relationship there is nothing to be scared of. If anything, it complements the client relationship you have built up as a broker.

Mhairi MacLeod: In the last couple of weeks we have had two clients go direct to Prospa, and we knew they had gone there following a courtesy call from Prospa touching base. Then my team rang the customer to ask about their experience, and we got a car finance deal out of them. So even if they go direct to Prospa, the client isn’t gone.

What’s the future of small business lending?

Josh Ugo: I think regulations over the next few years will be the greatest change.

Mhairi MacLeod: I think as more fintechs enter the market we will see more money from overseas. Those of us who have been through the GFC remember how we were all kicked to the curb by major lenders, so I see more offshore money coming in, more fintechs, customers embracing those third party lenders that they didn’t know about, and us as brokers

showing them the way. We have such an open playing field and so many amazing products to offer.

Alex Brgudac: In the US and Asian markets the fintech experience is

Gen Xers or baby boomers. We are leveraging that and providing something new for our brokers so they can join the fintech revolution.

Stephen Hale: The trend we

“When I first started working with Prospa I was extremely hesitant because they had direct contact with my customer” Josh Ugo, director, Finicky Finance different, so for Prospa, being the leading fintech locally, the benefit we have is that we are building a fintech specifically for Australia. The big difference compared to other overseas markets is that Australians still want to talk to a human, regardless of whether they are millennials,

are seeing at MFAA is a shift in brokers diversifying, and we are working with new data partners to measure how the different market shares continue to grow. When the major lenders restricted mortgage lending, the online mortgage market grew, so we expect the same

thing to happen now.

Steve Sladek: The big question is what is going to happen with the major banks? They are sleeping giants: they have a large customer base and will want to keep their bigger clients. But, overall, they are going all out to retain these big existing clients, while perhaps pushing away new clients. It’s interesting to see how they will react to what is going on in the marketplace.

Matt Bauld: Change is always going to occur; it’s what you do with the change that makes a difference. The fintech revolution is happening around the world, but there is appetite for Australians to continue to talk to someone about their financial requirements.

The big opportunity is to see that as an opportunity and work with customers to meet their needs. AB www.brokernews.com.au

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AUSTR ALIAN MORTG AGE AWARDS

CELEBRATING THE BEST OF BROKING A record crowd of more than 650 mortgage professionals gathered at The Star in Sydney on 19 October for the 2018 Australian Mortgage Awards, sponsored by Westpac.

Celebrating mortgage broking’s top talent, the event saw a total of 31 awards presented to the industry’s best brokerages, banks, non-banks, aggregators and individuals from across Australia, including 14 dedicated broker trophies.

“It’s a dynamic time for our industry. We face immense change, new challenges and opportunities, technological disruption, continued regulatory change and changing customer behaviour – which is why coming together at events like these is paramount, giving us all the opportunity to network, share best practice and celebrate excellence,” said Warren Shaw, head of broker distribution at Westpac, which also won the award for Major Bank of the Year.

“It’s been an outstanding event and top quality as always.

We’re proud to be involved”

Photography by Peter Secheny and Simon Kerslake

Mike Felton, CEO, MFAA

AWARD SPONSORS

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In partnership with

MFAA YOUNG GUN OF THE YEAR – FRANCHISE

Presented by Mike Felton, CEO, MFAA

Winner Mick O’Shea, finance broker, Loan Market

WESTPAC AUSTRALIAN BROKER OF THE YEAR; EQUITY-ONE MORTGAGE FUND BROKER OF THE YEAR – PRODUCTIVITY; ANZ BROKERAGE OF THE YEAR (1–5 STAFF)

Presented by Sarah Willsallen, NSW/ACT state GM, mortgage broker distribution, Westpac

OFFICIAL PUBLICATIONS

Winner Josh Bartlett, mortgage broker, Loan Market Bayside

ORGANISED BY

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BLUESTONE BROKERAGE OF THE YEAR – DIVERSIFICATION

Presented by Craig Meale, state manager, Bluestone

Winner Bell Partners Finance

BROKERAGE OF THE YEAR (6–20 STAFF)

Presented by Katrina Makhoul, GM, MSA National

Winner Option Finance Australia

AUSTRALIAN BROKER MOST EFFECTIVE ONLINE PRESENCE – BROKER; ME BROKERAGE OF THE YEAR (>20 STAFF)

Presented by Lauri Kroon, senior broker development manager, ME Bank

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Winner Shore Financial; trophy collected by managing director Alex Nochar and CEO Theo Chambers

The gala evening was hosted by one of Australia’s foremost stand-up comedians, Lawrence Mooney. Guests were also treated to music by popular band Furnace and the Fundamentals and soloist Linden Furnell, as well as an aerial acrobatics display.

Kicking off the awards, Shore Financial took the Australian Broker trophy for Most Effective Online Presence – Broker, in recognition of its revamped website and social presence, which now generates a steady stream of leads every month.

CEO Theo Chambers said, “We have put a lot of money into creating lead funnels using social media such as Facebook and then directing traffic back to our website where existing and potential clients can read more on our web page.”

Later in the evening, Shore Financial was also named ME Brokerage of the Year (>20 staff).

Sweeping the board in multiple categories, Josh Bartlett, mortgage broker at Loan Market Bayside, won the awards for Equity-One Mortgage Fund Broker of the Year – Productivity, ANZ Brokerage of the Year (1–5 staff), and the highly coveted Westpac Australian Broker of the Year award.

Commenting on his secret to success, Bartlett said, “It’s about having a great team, great processes and working with a great aggregation service. The people that we meet love our service and what we bring to the table. Customers absolutely love what we come up with, and we just love finance.”

In a hotly contested category, Alex Veljancevski of Eventus Financial was named Australian Young Gun of the Year – Independent.

“I did not expect to win this award, so it’s a very humbling experience and I appreciate it so much,” he said.

“I think it’s because we really go above and beyond for our clients. I get very personal about getting a result for clients, so I really try to understand what they are trying to achieve.”

Meanwhile, Mick O’Shea, finance broker at Loan Market, won the Young Gun of the Year – Franchise award, and the trophy was presented by MFAA CEO Mike Felton.

He said, “I think this is one of the premier events of the year. It’s been an outstanding event and top quality as always. We’re proud to be involved and to partner with AMAs again.”

NEXTGEN.NET NEW BROKERAGE OF THE YEAR

Presented by Tony Carn, director of sales, NextGen.Net

Winner Insight Property Finance Highly Commended Loan Market – Feedback Finance

BEST CUSTOMER SERVICE FROM AN INDIVIDUAL OFFICE

“This is my first Australian Mortgage Awards, and it’s great fun”

Presented by Nick Young, founder, Trail Homes

Winner Smartmove Professional Mortgage Advisors

PEPPER MONEY BROKER OF THE YEAR – SPECIALIST LENDING

Will Unkles, director, 40 Forty Finance

Winner Stuart Styles, managing director, Arthurmac & Co

Presented by Siobhan Williams, BDM for NSW and ACT, Pepper Money

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ANZ BROKER OF THE YEAR – COMMERCIAL

Presented by Michael Volkiene, state manager commercial broker, ANZ

Winner Daniel Green, founder and director, Green Finance Group

YOUNG GUN OF THE YEAR – INDEPENDENT

Presented by Louisa Sanghera, director and principal broker, Zippy Financial Group

Winner Alex Veljancevski, director, Eventus Financial

FBAA BROKER OF THE YEAR – INDEPENDENT

Presented by Peter White, executive director, FBAA

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Winner Will Unkles, director, 40 Forty Finance

The award for FBAA Broker of the Year – Independent went to Will Unkles, director of 40 Forty Finance. It was presented by FBAA executive director Peter White.

In the three years since launching his firm, Unkles has seen 100% annual growth and has big plans for the future.

“I’m really shocked by the whole thing. I came here not expecting to win – I was just really happy to be nominated. This is my first Australian Mortgage Awards, and it’s great fun,” he said on the night.

“The growth of the business has been mostly through my own network. It’s all been organic word-of-mouth, positive experiences, and clients have sent their family and friends to use my services as well. So it’s been a crazy three years, but we are starting to feel the benefits. I definitely want to grow at 100% again this year.”

ALI GROUP BROKER OF THE YEAR – INSURANCE (MORTGAGE PROTECTION AND LIFE)

Presented by Gabrielle Moscati, national sales manager, ALI Group

WORD FROM THE WINNERS – BANKWEST took home two awards in the highly contested categories of BANKWEST Non-Major Bank of the Year and Most Effective Online Presence – Lender.

The bank’s general manager of third party, Ian Rakhit, says, “These two awards are a sign of how hard we work to make brokers’ lives more simple and easy, and they are testament to the work being done behind the scenes as well. We’re on a journey to create a world-class home loan experience, making it simpler and easier to support brokers in servicing customer needs.”

Bankwest has adopted an incremental, broker-led approach to building and delivering its new online presence since November 2016 with the launch of the Home Loan Tracker Application. This is a web-based tool designed to keep brokers and customers informed throughout the home loan application process, from lodging the application to approval and the first repayment.

In July 2017 Bankwest launched the Home Lending Portal, which allows brokers to track critical information and the real-time status of current home loan applications; monitor existing customer loans; and access a range of other helpful information. This was followed by the launch of the Home Loan Pricing Tool, which offers ‘real-time responses’ to mortgage rate requests, providing brokers with decisions on discretionary rates for prospective homebuyers.

The year was rounded off with the launch of the new Bankwest website, giving brokers access to key product, policy and pricing information. Finally, in July 2018 Bankwest launched free, upfront auto-valuations, and brokers now have the ability to request an auto-valuation prior to starting a new home loan application.

“Bankwest was one of the first institutions to step into the brokering world, and through this careful balance of digital and real people support I’m looking forward to seeing Bankwest continue to work closely with brokers to meet customers’ changing needs in the future,” Rakhit says.

“I couldn’t be more proud of the team I’m lucky enough to work with every day at Bankwest.”

Winner Nicholas Kakalis, managing director, Finance Unlimited; trophy collected by Damien Roylance, director, Entourage Finance

LIBERTY AUSTRALIAN BROKERAGE OF THE YEAR

Presented by John Mohnacheff, national sales manager, Liberty Financial

Winner Option Finance; trophy collected by CEO Allan Fong

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BUSINESS PROFILE

THE PERSONAL TOUCH Promising to shake up borrowing, funding and even interest rates, Australian Mortgage Marketplace has big ambitions to personalise the residential lending market – and enhance the role of the broker in the process. COO Kym Dalton explains year is 1992. Securitisation is the new financing mechanism on the block and the banks are riding the wave, generating super profits on home loans. Seeing an opportunity to change how things are done, a non-bank sector emerges and quickly gains pace by challenging the incumbents with promises of better rates and better customer service.

What ensued from there has brought the market full circle.

This year, the royal commission revealed that unethical conduct and a customer-comes-last attitude remains among the major bank lenders. While it could be said that history is repeating itself, this time one challenger has a tech-savvy edge.

“Incumbent lenders have been treating customers poorly, whilst marginally meeting the requirements of responsible lending conduct. Right now, the market is broken. Existing lenders have breached the covenant of trust,” says Kym Dalton, COO of Australian Mortgage Marketplace.

“We recognise there is an opportunity here and we plan to overhaul the mortgage market by taking advantage of the latest technology available.”

Along with a cohort of fellow industry veterans (see box), Dalton has established a 100% wholesale, broker-focused neo-lender with a remit to shake up the way loans are assessed, originated and funded.

THE

Personalised mortgages Launching in March 2019, Australian Mortgage Marketplace will be the first lender to offer rapid approvals on a truly personalised mortgage product tailored to the individual’s objectives and credit score.

There will not just be one standard 26

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loan on offer; instead an Intelligent Credit Engine will take into account more than 100 data points, then design an exact profile for the borrower and price the mortgage

to approval. Products and procedures have not kept pace with fundamental changes to Australia’s work and life patterns, nor have the opportunities presented by advances in technology

“Right now, the market is broken.

Existing lenders have breached the covenant of trust” Kym Dalton, COO, Australian Mortgage Marketplace accordingly, using complex mortgage funding data and proprietary algorithms.

“Current lending credit assessment procedures are antiquated, resulting in a lack of consistency and lengthy times

been embraced,” says Dalton.

For couples and joint investors, the individual credit profiles will be merged to create a single rate.

This approach to detailed profiling means better rates and products for

everyone. Even complex applications from the self-employed can be quickly assessed to meet prime criteria.

“We are living in an age where we can obtain borrower information rapidly and then use that information to customise and tailor an outcome more suitable to the borrower. What we are doing is revolutionary,” Dalton says.

The Intelligent Credit Engine is a future-proofed tool developed by the lender in-house and designed for use by brokers under their own branding.

The broker will input customer information – most of which can be preloaded through their CRM – while behind the scenes the borrower’s situation, including income, expenses and credit profile, will be electronically verified to confirm they are a prime candidate.

This “scientific, risk-based pricing”, as Dalton describes it, delivers personalised interest rates and genuine approval, which the firm promises will carry more weight than the standard pre-approval.

As comprehensive credit reporting is rolled out, naturally the Intelligent Credit Engine and its benefits

THE EXEC TEAM

Kym Dalton, Co-founder and COO

Previously the CEO of a major lender, Dalton will establish broker distribution and deliver the infrastructure to underwrite and approve mortgage loans.

Graham Andersen, CEO and co-founder

With more than 30 years’ experience in local and international capital markets, Andersen is responsible for delivery of key responsibilities and wholesale funding structures.

Scott Tyne, product expert and co-founder

Tyne will head delivery of the Index Mortgage within tax and funding requirements, as well as a management structure that allows product scaling.

Luke Andersen, director of technology and co-founder With 12 years’ experience in structured finance and tech, Andersen will deliver the technology platform on which the company will launch its mortgage products.

not make Australian Mortgage Marketplace a fintech – and it certainly doesn’t mean crypto mortgages are about to be added to the product suite.

The final proposition is about giving back to the broker network through what Dalton terms an “industry equity participation”.

Funding the next source of capital, brokers have the chance to make a modest investment in the company, capped at $10,000.

“We are giving the broker industry the opportunity to invest in us and be part of the revolution,” Dalton says.

From left: Luke Andersen, Graham Andersen, Scott Tyne and Kym Dalton

will multiply, Dalton says.

“Our Intelligent Credit Engine takes a holistic view of home loan applications, assessing scenarios on merit, rather than against broad eligibility rules. The credit-decision algorithms process applicant information, verified by third party sources, to provide immediate feedback to the broker and customer,” he explains.

The final piece of the puzzle is demonstrating a customer’s financial literacy regarding the loan they are entering into. “We’ve designed a new approach that explains the specific loan and its terms to the borrower, rather than providing generic information, and then we confirm the

customer is entering into the loan in a responsible manner,” says Dalton.

Making a change The revolution doesn’t end there.

Historically, securitisation is opaque and analogue: it is dependent on spreadsheets and – as happened in the last decade – it has the potential to upend entire economies.

“Securitisation really hasn’t changed in structural style or format since 1992, so on the funding side there has been very little innovation in the way RMBS are made and sold.

We are determined to change that as well,” Dalton says.

This will happen through the use of distributed ledger technology (DLT)

– the tech behind blockchain – to enhance transparency for the superfunds and other institutional investors backing the company. The result is that loans will be funded on what the lender terms Australia’s first mortgage securitisation blockchain.

“Our revolutionary smart securitisation platform, Carbon, leverages DLT to deliver the benefits of increased transparency, security and automation to superannuation funds and institutional investors like nothing the industry has ever seen.

Carbon offers operating efficiencies that will create lower-pricing benefits for Australian borrowers.”

However, Dalton is keen to explain that the implementation of DLT does

Problem-solving Australian Mortgage Marketplace has emerged from the culmination of almost 30 years of observing issues in the current financial system: the inefficiencies in funding and customer contact; the credit data points used in lending; and the systems and processes that should remain native.

The next innovation therefore focuses on providing brokers with more information than ever before, through company’s Broker Plus portal.

“More than 53% of Australians seek credit advice from a mortgage broker, and that’s why we will empower brokers to service customers more efficiently using our Broker Plus portal. Australian Mortgage Marketplace is a genuine wholesale lender that won’t compete with a broker for the customer’s relationship,” Dalton says.

The 100% broker distribution model will also see Australian Mortgage Marketplace join forces with select broker groups.

Australian Mortgage Marketplace’s proposition is designed to provide a fix for the existing lack of transparency, consistency and, occasionally, compliance. It also has the potential to cascade throughout the wider financial system, lifting standards and changing how things are done.

“Our team has a history of disrupting mortgage markets, and what we are launching will be extraordinary, and we want the broker industry to join the revolution,” says Dalton. AB www.brokernews.com.au

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PEOPLE

Get involved in the discussion Share your thoughts at

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FROM THE FORUM

Top comments from trending stories on brokernews.com.au

VERIFICATIONS BY BROKERS ‘A RISK’ S&P Global Ratings has said the growth of the broker channel is an area of potential risk when it comes to verifying expenses. In a report discussing the decline of lenders mortgage insurance in residential-backed mortgage securities, the agency said, “Third parties can provide borrower information to lenders, leading to a risk of broker fraud if appropriate procedures are not in place to verify the accuracy and completeness of the information provided.”

Legislators: fraud is a crime. People who are going to commit a crime will not be dissuaded from doing so by any regulation. Now you risk genuine lending by trying to deregulate fraud. Find those who commit fraud and have them prosecuted – don’t penalise genuine people by making lending too hard for them to get.

SEQ Broker | 19 Oct 2018, 09:54 AM

ENDING BROKER CHANNEL WOULD BE ‘DRAMATIC’ While being grilled by a parliamentary committee, one major bank CEO said it would be “dramatic” to end broker services. As part of a review into the four major banks, NAB CEO Andrew Thorburn was the last remaining bank boss to be questioned. The committee quizzed him on issues such as customer remediation, bankers’ remuneration and small business lending. Thorburn said, “It would be dramatic, extreme, given that 50% of the volume coming to banks goes through brokers.”

Really | 19 Oct 2018, 10:26 AM

Someone tell S&P that it was bank employees who were exposed by the RC as committing most of the fraud in lending.

Lex | 19 Oct 2018, 10:27 AM

“Closing the channel?” Seriously! Misrepresentation comes from many sources. To suggest most comes from brokers is demeaning to our profession. The facts remain: the banks continue to hide and settle fraud internally and not report it.

Yeah, yeah, yeah... Heard it all before: ‘those pesky brokers; they are the ones we need to watch’. All the while the direct channel goes under the radar to do as they please. Better to watch the ones with a DUI in the direct channel for areas of potential fraud or conflict between parent company KPI expectations, remuneration and pressure to meet volume hurdles.

One of the things that the RC has brought to light is that the banks were already doing the wrong thing. They knew it was wrong; they did it for years knowing it was contrary to best or fair practice. Now they have been caught, they change their practice, pocket their bonus, say sorry and point the finger at brokers.

Keith Bridges | 22 Oct 2018, 09:12 AM

Alan | 19 Oct 2018, 10:40 AM

The source of misrepresentation came from the introducer channel, not the broker channel. The local branch managers were shown to be complicit with the introducers. NAB has tightened its guidelines on who can be an introducer.

I’ve written to the MP as he is my local member. That said, it’s looking unlikely he will be part of the decision-making process anyway as he won’t be in government for much longer.

Brokers are required to have a Cert IV or Diploma of Finance before they can operate, and then have to collect volumes of documentation and follow a detailed process before submitting an application. People working in banks have a yearly online compliance module to complete, which is produced by the bank.

Both areas should have to satisfy the same criteria, and maybe the lending officers in the bank need to have the same education and process as the brokers do. It won’t stop fraud but at least it is a level playing field.

Broker | 22 Oct 2018, 03:21 PM

Roger | 19 Oct 2018, 12:27 PM

Joe Siragusa | 22 Oct 2018, 11:38 AM

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S&P’s comments are around 14 months out of date. Please catch up – making a fool of yourselves publicly is not helping your already-poor standing.

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DATA

WESTERN AUSTRALIA

ACT SPOTLIGHT

Perth banking on affordability, despite low confidence

COUNTING THE COST

Although affordable, Perth needs to stabilise its economy if it wants to create demand.

“The market is too volatile. When you’ve got the mining boom, it goes nuts. When you’ve got a mining downturn, it goes down by 25%.

I’m more interested in long-term growth than having a bit of a gamble,” says Philippe Brach, CEO of Multifocus Properties. “I don’t want investments to be exposed to a one-horse economy. You want to see capital growth over a long period.”

Affordability has continued to rise since 2014 due to the heavy decline in property prices, and the market has been aiming to draw first home buyers who are on a budget.

The June 2018 Housing Affordability Report published by the Real Estate Institute of Australia indicates that the number of first home buyers increased by 4.8% over the June quarter; these buyers also made up 35.4% of the owner-occupier market.

Area

Type Median value

The political sector ensures Canberra has a strong economy, but rising prices and high rates may end up quelling owner and investor demand

Quarterly

12-month

growth

growth

Perth

H

$500,000

-2.9%

-1.0%

WA Country

H

$325,000

-5.8%

-2.9%

Perth

U

$380,000

-4.0%

-3.7%

WA Country

U

$220,000

-13.7%

-13.3%

NEW SOUTH WALES

Performance of land and house assets outstrips units The land and housing markets outside of Sydney may be where you want to be, according to Caifu Property’s head of acquisitions, Damien Lee. “We’re still seeing good opportunities and good growth in the ripple-effect markets that are coming off the capital city – to the south, Wollongong; to the north, the Central Coast and Newcastle. It’s more structured towards the land market,” he says.

In fact, it’s the unit market that buyers should be steering clear of. “We’re starting to see the slowdown and correction coming from highdensity apartments based on supply and price point,” Lee says.

Building approvals have slowed in the Central Coast, but this may not necessarily be a cause for concern as the low stock has put pressure on the market and given rise to greater demand.

“Councils down there have been a bit slow on delivering new land approvals for new estates, which is cross-correlating and slowing down building approvals,” Lee explains.

Area

Type Median value

strong presence of the political sector in Canberra continues to support this stable, growing market.

“The federal government is a major direct and indirect employer. The attractiveness of the local labour market has been a key driving force behind the population increase, and this growth trajectory is likely to continue,” says Kate Forbes, national director of property strategy at Metropole Property Strategists.

Over the past few years, the ACT has enjoyed a consistent and steady inflow of residents looking to benefit from the significant employment opportunities in the state, and both underemployment and effective unemployment rates remain low. Despite this, the population remains at 300,000 and it seems it’s becoming increasingly difficult to buy property in Canberra.

“The unemployment rate of 3.9% is low – even below the NSW average. But while Canberra may be a great place to live and buy your home, the high level of rates and excessive land tax takes the cream of investing in Australia’s capital,” Forbes says. “In 2017, the Canberra Times reported that owners of units and apartments faced a big rates hike as the ACT government moved to bring their rates into line with freestanding houses.”

The increase in rates is a response to the lowering of stamp duty, and is prompting landlords to look at selling their properties.

“Although values have continued to increase, and remain at historic highs, the annual rate of growth over the past year was the slowest it has been since June 2016,” Forbes says. Adding to Canberra’s woes, the high number of apartments under construction at present means that oversupply could wind up becoming a big issue for the capital if demand wilts due to pricing. AB

Quarterly

12-month

growth

growth

H

$927,250

-8.7%

1.0%

Median price (houses)

NSW Country

H

$472,000

0.0%

4.7%

$688,471

Sydney

U

$712,888

-1.0%

-1.0%

NSW Country

U

$390,000

-0.6%

0.0%

www.brokernews.com.au

Canberra property market continues to show its strength Although Canberra’s housing market is directly linked to the strong public sector presence, recent job cuts have not made a significant impact on property values as the market is also strong and the auction success rate is one of the highest in Australia.

The current government’s vision of a stamp-duty-free Canberra is getting closer, and it is likely the ACT will be the first state to abolish stamp duty completely. Commercial property will not attract stamp duty in Canberra from July 2019.

There has been significant apartment stock delivered in Canberra, and many more units are still to come. However, if population growth continues, then demand for these new apartments will be present.

Despite this, investors must take a cautious approach as there is simply too much stock right now.

Canberra is the place to watch – it is a delightful place to raise a family, and this lovely city has much more to offer.

Jugal Baldawa Mortgage broker, Jaira Home Loans

SUBURB TO WATCH: BONNER

Sydney

30

BROKER PERSPECTIVE

THE

Median price (units) $467,408

Source: CoreLogic

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

9.6%

32.9%

76.3%

4.4%

12-month growth

3-year growth

5-year growth

Indicative gross rental yield

3.3%

16.3%

3.7%

5.3%

TASMANIA

Fragmented market demands more projects in Adelaide Hobart is still staking its claim as arguably the bestperforming capital city in Australia, but it may not hold on for much longer. “With investors moving their aim to the next ‘hotspot’, Hobart’s strong property price growth will slow in 2019,” says Kate Forbes, national director of property strategy at Metropole Property Strategists. “Over the last five years, median dwelling prices increased at double the rate of household income, creating a deterioration in affordability.”

The June 2018 Housing Affordability Report by the Real Estate Institute of Australia confirms that housing and rental affordability declined in the 12 months to June. This could be a troubling development for Hobart and gives credence to the idea that Tasmania is a flash-in-the-pan market. “It’s lovely to visit, but I’m not keen to invest. Tasmania is an island that relies on tourism,” says Multifocus Properties CEO Philippe Brach.

OPPORTUNITIES AND KEY INFRASTRUCTURE

Transport

Asset values

Commercial property

CBD development

$800m Phase 1 Canberra metro due for completion by year end

53% of building owners close to the metro route expect property values to increase

Overall vacancy rate for commercial offices was 13.5% on 1 July

New Civic Quarter building due for completion by end 2019

HIGHEST-YIELD SUBURBS IN AUSTRALIAN CAPITAL TERRIRTORY Suburb

Type

Median price

Quarterly growth

12-month growth

Lyons

U

$257,500

1%

-6%

Hawker

U

$326,194

13%

-26%

Greenway

U

$365,000

1%

3%

Phillip

U

$338,750

-17%

-21%

Wright

U

$378,000

-3%

-7%

Area

Type Median value

Quarterly

12-month

growth

growth

Hobart

H

$440,000

-5.4%

11.6%

TAS Country

H

$295,000

0.7%

7.8%

Hobart

U

$331,400

-3.9%

10.8%

TAS Country

U

$240,000

-1.8%

0.8%

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31

DATA

QUEENSLAND

12-month

growth

growth

Brisbane

H

$540,000

0.0%

2.8%

QLD Country

H

$426,000

-2.1%

0.0%

Brisbane

U

$405,000

0.0%

-1.4%

QLD Country

U

$385,000

-2.5%

1.3%

MEDIAN HOUSE AND UNIT PRICES

Population growth buoys performance but affordability still a challenge

$1,000,000

Quarterly

12-month

growth

growth

Melbourne

H

$725,000

-4.2%

8.2%

VIC Country

H

$351,000

-2.5%

6.7%

Melbourne

U

$535,000

-0.9%

4.9%

VIC Country

U

$261,611

-3.1%

3.8%

32

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70

Sold

24

Not sold

21

Clearance rate

53.3%

PERTH Total auctions

32

Sold

2

Not sold

13 13.3%

$1,100,000

Houses

Units

Sydney Melbourne Brisbane Adelaide

Perth

Hobart

$510,000

$441,000

$301,000

$0

$385,000

$100,000

$490,000

$200,000

$315,250

$300,000

$455,000

$500,000 $400,000

$545,000

$700,000 $600,000

$710,000

$800,000

$658,000

$900,000

$865,000

While Melbourne’s property prices are likely to fall a little further, “they will be underpinned by a robust economy, Australia’s strongest population growth, and the influx of 35% of all overseas migrants”, says Kate Forbes, national director of property strategy at Metropole Property Strategists.

“Housing affordability has become an issue for some segments of the market. As is normally the case at this stage of the cycle, more expensive properties which are more subject to discretionary spending are the weakest segment of the market,” she adds.

Low yields also suggest that investors should be careful. Nonetheless, the demand is strong enough for Melbourne to still be a great investment despite the low returns and the slowdown.

“It’s absolutely scary how many people are still moving to Melbourne, which is a good thing. They’re just trying to play catch-up on the physical property supply side of things versus the population,” says Damien Lee, head of acquisitions at Caifu Property.

Type Median value

Total auctions

Clearance rate

VICTORIA

Area

ADELAIDE

Darwin

$427,500

Quarterly

$394,200

Type Median value

There were 1,850 homes taken to auction across the combined capital cities this week, returning a preliminary auction clearance rate of 50.7%.

Last week, the final auction clearance rate came in at 49.5% across a slightly lower 1,817 auctions.

While preliminary results show an improvement on last week’s final clearance rates, it’s likely that the final weighted average result will see its usual downward revision as more results are collected and come in below 50% for the third consecutive week. If we compare figures from this time last year, both clearance rates and volumes were significantly higher. Interestingly, looking at results by property type, units were much more successful at auction this week, with 58% selling, while only 48% of houses sold. This is quite a difference to the same week last year, when both property types saw virtually the same success rate, at 67%.

$530,000

Area

WEEK ENDING 14 OCTOBER 2018

$683,000

Although recovering from an apartment oversupply, Brisbane remains in a precarious position. “It wouldn’t take much to put it into oversupply again, based on some more big projects coming through, so in Brisbane and its surrounds we’re still tagging the land side of things,” says Damien Lee, head of acquisitions at Caifu Property.

Meanwhile, amenities are adding to the appeal of the city’s north suburbs. “The Northern Suburbs are quite good – there’s a new university coming up in Petrie,” says Philippe Brach, CEO of Multifocus Properties. “Within 50 minutes of the CBD, you can find decent houses below $550,000. There are some good investments to be had that are growing nicely in terms of capital gains because you’re so close to the centre, but that also offer better yields than if you’re closer to the city.”

With an infrastructure boom happening in Brisbane, this could drive up demand considerably for these nearby pockets.

CAPITAL CITY AUCTION CLEARANCE RATES

$327,500

Brisbane recovers from an overload of apartments

Canberra

CAPITAL CITY HOME VALUE CHANGES Capital city

Weekly change

Monthly change

Year-to-date change

12-month change

Sydney

-0.2%

-0.6%

-4.4%

-6.3%

Melbourne

-0.2%

-0.8%

-4.6%

-4.0%

Brisbane

0.0%

0.1%

0.3%

0.4%

Adelaide

0.1%

-0.3%

0.5%

0.8%

-0.2%

-0.7%

-3.3%

-3.3%

-0.2%

-0.6%

-3.6%

-4.3%

Perth Combined 5 capitals

*The monthly change is the change over the past 28 days

BRISBANE CANBERRA Total auctions

69

Sold

35

Not sold

20

Clearance rate

Total auctions

116

Sold

26

Not sold

47

Clearance rate

35.6%

63.6%

SYDNEY Total auctions

645

Sold

225

Not sold

208

Clearance rate

52%

TASMANIA

MELBOURNE Total auctions

914

Total auctions

4

Sold

374

Sold

0

Not sold

344

Not sold

0

Clearance rate

Clearance rate

52.1%

SOUTH AUSTRALIA

Area

Adelaide defies trends seen across the eastern states Adelaide has spent many years putting in a middling performance, and recent plant closures have had a significant effect on the economy. However, confidence seems to be creeping back.

“The June quarter matched the record-breaking median posted last quarter and shows no signs of going anywhere but upward. When we hear the eastern states have come off the boil and into cool water, Adelaide is defying the trend,” says Alex Ouwens, president of the Real Estate Institute of SA. “Now is a great time for first home buyers and investors, and the results show that they are on board. Business sentiment is at its highest in many years too. The growth has been supported by a boost in sales, although there are concerns that the taxes imposed on overseas investors could curb interest."

N/A

Type

Median value

Quarterly growth

12-month growth

Adelaide

H

$469,000

2.9%

2.9%

SA Country

H

$290,000

-4.9%

1.0%

Adelaide

U

$385,000

4.1%

4.1%

SA Country

U

$186,000

-23.1%

-2.6%

All data sourced from CoreLogic.com.au

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33

PEOPLE

Aggregator Connective

IN THE HOT SEAT Mint Equity finance broker Preeti Kowshik talks about building respectful relationships and the challenge of being the bearer of bad news in a tough lending market

Who inspired you to become a broker?

When my husband and I were looking to buy our first home we A had absolutely no idea where to start and probably didn’t make the best decisions. We were lucky that we found a great broker, and the experience inspired me to use my service and sales skills from the finance industry to help people find homes for their families and build property portfolios.

Q

What do you wish you’d known when you started out as a broker?

The importance of building strong relationships and networks is A something I had to learn quickly. Broking can be an isolated job, and because there are so many moving parts – the client, lenders, real estate agents, conveyancers – building strong, respectful relationships is key to providing a quality solution for the client.

These relationships are also essential to the education process and understanding the lending landscape. I think most new brokers underestimate how much time is needed for education. Today’s lending environment is tough and constantly changing, so working closely with lenders, BDMs and other brokers to ensure we’re constantly learning and educating ourselves is something I probably wasn’t prepared for to this extent.

Q

What’s the greatest challenge for brokers at this time?

Brokers are faced with many challenges at the moment, but A managing client expectations is the most crucial, as they are the ones directly impacted by recent changes. It’s one thing for brokers having to deal with lender policy updates, but when a client has been working for years or months towards a property goal and you have to tell them someone moved the goalposts, that’s the challenge I enjoy the least.

The uncertainty around whether the client’s application is ‘approval worthy’ is a big challenge for brokers as we are the ones who have to deliver the message.

Q

What’s one thing, personal or professional, that you hope to achieve before the end of the year?

For me it’s not about settlement volumes, it’s about how A many clients I can help get their family home or improve their position by growing a property portfolio. My goal is to help as many people as I can, and that doesn’t always mean there is a settlement at the end. It’s about helping people find the right path to their property goals, just like the broker did for my husband and I when we first arrived in Australia. AB

Q

34

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36

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