MAY 2020 ISSUE 17.09
HIGH-PERFORMING REGIONAL BROKERS Award-winning brokers like Narelle Kerstan and George Smith-Roberts are proving that location is no barrier to superior service and outcomes /14 ALSO IN THIS ISSUE… Commercial lending still strong Brokers shouldn’t consider commercial lending as a dead prospect just yet /23 Majors intentionally muddy the waters A purposeful lack of price transparency by banks makes it hard for borrowers to truly compare them, report fi nds /24 Loan book growth at a standstill Only one of the big four registered any meaningful movement over the month of March /04
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Ready to exit hibernation? Economic experts are already suggesting the peak of “hibernation mode” could be behind us /17
Broker Connect How the coronavirus pandemic has changed, and will continue to change, the mortgage industry /20
Broker on broker How to come out the other side of this pandemic batting to win /25
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IN THIS SECTION
Lenders Big four bank passes FHB scheme “milestone” /04
Industry groups Open banking deadline postponed again /06
Market One third of households worse off due to COVID-19 /10
Aggregators Adoption of online leadgen tool soars /12
Technology Bank chief execs get behind COVIDSafe app /08
www.brokernews.com.au MAY 2O20 EDITORIAL
SALES & MARKETING
Editor Sarah Megginson
Publisher/Sales Manager Simon Kerslake
News Editor Madison Utley
GLOBAL WATCH How is the mortgage and broking world responding to the COVID-19 pandemic overseas? Here’s your snapshot of the news that matters most to the mortgage industry in the US
BANKS ACCUSED OF SHUFFLING STIMULUS LOANS FOR PROFIT giants Wells Fargo, Bank of America, U.S. Bank and JPMorgan Chase have been accused of shuffling the order of stimulus loans to maximise their profits. A series of class-action lawsuits filed in California and New York accuse the banks of maximising the fees they were paid to participate in the federal government’s Paycheck Protection Program, according to a report by the Charlotte Observer. The lawsuits accuse the banks of submitting larger loans to the Small Business Administration ahead of smaller ones. The upshot was that larger businesses got greater access to PPP funds before the program ran out of funding, whereas banks are supposed to process PPP applications on a first-come, first-served basis. BANKING
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LOAN DEFERRALS 100X HIGHER THAN PRE-COVID LEVELS unemployment claims rising to astronomical levels in the US, the share of all mortgage borrowers asking to be put into forbearance (payment deferral) plans grew to 3.5 million as of 19 April. The total number of loans currently in forbearance climbed to 6.99% of servicers’ portfolio volume, up from 5.95% the week prior, according to a survey by the Mortgage Bankers Association (MBA). Before the onset of the coronavirus pandemic in early March, only 0.25% of all loans were in forbearance. “While the pace of job losses has slowed … millions of people continue to file for unemployment. We expect forbearance requests will pick up again as we approach May payment due dates,” said Mike Fratantoni, senior vice president and chief economist at MBA. WITH
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AS GDP FALLS, HOME PURCHASE APPLICATIONS RISE figures speak to both the colossal disruptive power the COVID-19 pandemic NEW has had over the US economy, and the strong demand fuelling the country’s housing market. In its advance estimate of first quarter GDP, the Bureau of Economic Analysis found that US GDP fell 4.8% compared to the fourth quarter of 2019. However, purchase applications increased 12% in late April. While the numbers indicate two disparate trends, they reinforce one of the most common narratives being projected for the remainder of the COVID-19 crisis: that GDP will get hammered in the short term, but the effects on the housing market will be minimal.
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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LENDERS LOAN BOOK GROWTH COMES TO NEAR STANDSTILL
NEW HOMES FOR FIRST-TIME BUYERS THROUGH GOVERNMENT SCHEME
data released at the end of April revealed that growth in the majors’ home loan books was almost at standstill, with only one of the four registering any meaningful movement over the month of March. CBA stood out from the rest, adding $1.75bn to its loan book, with the vast majority of growth on the owneroccupier side. The loan books at Westpac and NAB remained virtually unchanged overall, with slight dips in investment lending and equivalent rises in the owner-occupier category. ANZ’s loan book was down just over $300m from the month before. APRA
1,000 CBA customers have purchased a property under the First Home Loan Deposit Scheme
CBA borrowers have secured a place under the scheme
WESTPAC ADJUSTS CREDIT POLICY FOR COVID-19 has made changes to its consumer credit policy, saying these will allow it to continue helping customers to purchase properties in a “responsible and sustainable way” during the COVID-19 crisis. The most significant change concerns income verification: as of 30 April, all PAYG and casual employees must provide more recent proof of income for servicing a loan. The latest payslip or other relevant document must be no more than 14 days old, or one month old for monthly pay cycles, at the time of application.
remaining spots have been set aside for CBA and NAB, all of which have been reserved
new places in the scheme will be made available from July 2020
“We want to reassure customers that we are … here to help them realise their home ownership goals” Angus Sullivan Group executive of retail banking services, CBA
BIG FOUR BANK PASSES FHB SCHEME ‘MILESTONE’ CBA has announced that 1,000 of its customers have purchased a property under the First Home Loan Deposit Scheme launched by the government four months ago
leading processing and turnaround times for home loan applications.” To date, the National Housing Finance and Investment Corporation (NHFIC) has released 10,000 places under the scheme for this financial year, with 5,000 spots set aside for major banks CBA and NAB – all of which have been reserved. The next 10,000 places in the scheme will be made available from July 2020. On its website, the NHFIC encourages first home buyers to continue to engage with the major banks, even though all their placements are reserved, as spots may become available if applicants do not proceed with purchasing a property. “Whether you are purchasing your first home or looking to buy a new home, we want to reassure customers that we are open for business and here to help them realise their home ownership goals,” Sullivan said.
reaching its first milestone of helping 1,000 first home buyers take possession of their new home, Commonwealth Bank has assisted an additional 2,400 borrowers in securing a place under the government’s First Home Loan Deposit Scheme (FHLDS). At the beginning of April, the customers who had snagged a spot but not yet found a property were informed that they could request an extension for another 90 days to enter a contract of sale. The extended timeline gives first home buyers a
total of six months to find a property, something the bank hopes will bring them “peace of mind” that their place under the scheme is safe during this difficult economic period. “There is a lot of interest and uncertainty about the impact the coronavirus will have on the Australian property market, so it’s encouraging that we have crossed this exciting milestone in the current environment,” said CBA group executive of retail banking services Angus Sullivan. “As Australia’s largest home loan lender, our Australian-based call centres remain open for business, and we continue to have industry-
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You can count on CommBank. Value, flexibility and support so we can help you and your customers achieve the best outcomes. • Australian based end-to-end application processing and call centres. • Dedicated assessment teams ensure fast and consistent refinance decisioning. • $2,000 Cashback when your customers switch their eligible home loan to CommBank. Apply by 3 August 2020 and fund by 9 October 2020. Minimum refinance amount $250,000¹. • Our lowest 1, 2 and 3 Year Fixed Rates with a Wealth Package for Owner Occupied home loans. Principal and Interest repayments, with no establishment fee or monthly loan service fees. Minimum package lending balance of $150,000². • Complimentary Home Loan Compassionate Care protection for eligible Owner Occupied home loans. We’ll support your customers by paying home loan repayments for around 12 months, if the customer, their spouse or dependant passes away or is medically certified with a terminal illness³. • Your customers can manage their home loan and banking needs 24/7 with our CommBank app and NetBank. With helpful insights and tools at their fingertips, they can stay up to date and informed.
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Things you should know: ¹Owner Occupied interest only loans are eligible if funded on or from 7 April 2020. Customers must refinance their home loan from another financial institution. New loans and top-ups are not included in the minimum refinance amount. Bridging loans and the refinancing of an existing Commonwealth Bank or Bankwest home loan are ineligible for this offer. ²An annual package fee, currently $395, applies. ³Age and loan eligibility requirements and other limitations and exclusions apply. Refer to the full terms and conditions in the Home Loan Compassionate Care Information Booklet available at commbank.com.au/compassionatecare. Applications for finance are subject to the Bank’s normal credit approval. Approval criteria, fees, charges, terms and conditions apply. Commonwealth Bank of Australia ABN 48 123 123 124 Australian credit licence 234945.
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INDUSTRY GROUPS HALF A MILLION AUSSIES SEEK LOAN DEFERRAL have so far provided six-month loan deferrals on an estimated $6.8bn worth of business, mortgage and other loan repayments due to COVID-19. Australian Banking Association data shows that more than 320,000 homeowners have been approved for a deferral of their mortgage repayments. A total of 170,000 business owners have deferred business loan repayments, and nearly 37,000 other loan repayments, such as personal loans and credit cards, have been deferred. Since the start of the pandemic, banks have provided over $45bn in new lending to businesses. BANKS
OPEN BANKING DEADLINE POSTPONED – AGAIN A three-month extension has been granted due to the COVID-19 pandemic, pushing back the date by which non-majors need to make their product data available the deadline for nonmajor lenders to make their product data available under the Consumer Data Right had been set for 1 July 2020, the ACCC has granted a three-month extension due to the COVID-19 pandemic. The temporary exemption applies to non-major ADIs, including banks, building societies and credit unions, as well as non-primary brand products offered by the major banks. The eligible lenders will now be required to share product reference data – information about their rates, fees and features of their banking products – by 1 October 2020. The big four banks have been sharing this data since July 2019. “The ACCC is granting these exemptions as an acknowledgement of the intense WHILE
resource requirements of the industry as a result of the COVID-19 pandemic, and in particular non-major banks that may not be able to prioritise this at this time,” explained ACCC commissioner Sarah Court. “We understand that financial providers are dedicating many resources at present to support their customers; however, we do encourage providers to share product reference information on a voluntary basis if they are in a position to do so.” The implementation of open banking had already been postponed once before, in order to make time for additional testing to ensure that security and privacy protections were operating effectively. Both then and now, multinational consumer credit reporting company
Experian has welcomed the ACCC’s decision to delay. “It’s encouraging to see the ACCC continuing to push ahead with the launch of open banking while consulting with industry to agree to a time frame that’s workable in the current climate,” said Simone Jemmett, Experian A/NZ head of strategy and new markets. Jemmett highlighted the role that data could play in rebuilding Australia’s economy after the virus is contained. “There’s no doubt that digital channels are more important now than ever, and this will certainly be the case as we start to look ahead to recovery. Open banking will allow banks to be increasingly transparent about the products and services they offer, as well as enabling innovation that’s directly responsive to the changing needs of their customers,” she said. “We know from our research, both locally and in the UK, that consumers really know very little about open banking,” Jemmett added, pointing to Experian data that shows that nine out of 10 Australians are not aware of how open banking will impact them.
FBAA WELCOMES NEWS OF BID DEFERRAL FBAA has said ASIC’s decision
THE to defer commencement of the
best interests duty and remuneration reforms is a welcome and necessary move. However, FBAA managing director Peter White has sought clarification of ASIC’s statement that it would “continue to work towards releasing final guidance on both reforms in mid-2020”. “Given the regulatory guide was due in May, we need some clarity ... as mid-2020 is subjective,” he said. “Once the guidance is at hand the FBAA will be conducting a series of education and compliance training for implementing BID.”
“The ACCC is granting these exemptions as an acknowledgement of the intense [impact] … of the COVID-19 pandemic” Sarah Court Commissioner, ACCC
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TECHNOLOGY BROKER LAUNCHES ‘VIRTUAL’ LOAN EXPERIENCE brokerage Aussie has fully integrated FileInvite into its mortgage origination system to streamline the loan documentation process. Borrowers can now receive a link to their personal secure portal and supply required documents online from a variety of devices, including their phone. Combined with voice or video calls with their Aussie brokers, this allows the entire loan selection and application process to be completed without the need for face-to-face meetings or hard copies of documents. NATIONAL
DIGITISATION BREAKS DOWN ‘PAPER CHOKE POINTS’ executive chairman LOAN MARKET Sam White has said brokers should embrace the changes brought about by rapid digitisation in the last two months. In mere weeks, the use of digital signatures and VOI technology has broken down “paper choke points” that had been built into the industry. “We’re seeing turnaround times improve because, with the better digital interaction with customers, we’re actually seeing a better file created,” White said.
“Australia’s banks are right behind efforts to open up the economy in the coming weeks” Anna Bligh CEO, Australian Banking Association
BANK CHIEF EXECS GET BEHIND COVIDSAFE APP The CEOs of Australia’s banks have shown their support for the COVIDSafe app recently launched by the federal government new COVIDSafe app is intended to help trace the movement of the coronavirus within Australia, speeding up through automation the current manual process of finding people who have been in close contact with someone with the virus. According to Australian Banking Association CEO Anna Bligh, the app is an important part of the government’s plan to relax restrictions on community movement and reopen the economy. “The CEOs of Australian banks will download the COVIDSafe app and, to protect staff and customers, encourage their THE
staff to do the same,” she said. “It’s important the community embraces this app as a way of improving the ability of our front-line health workers to trace contacts of those who have tested positive to COVID-19. “Australia’s banks are right behind efforts to open up the economy in the coming weeks, when healthcare authorities say it’s safe to do so,” said Bligh. NAB also made a public show of support for the app. “It’s been heartening to see that Australia is flattening the curve, and if the COVIDSafe app can play its role in improving community safety, helping reopen
businesses and regain some of our normal lives, then that’s a good thing for all Australians,” said the major bank’s CEO, Ross McEwan. “There’s clearly still a long way to go, but improvements in contact tracing methods, further development of this app, and more testing of those with symptoms will be important to providing the confidence to slowly loosen restrictions while preserving progress on the health front.” McEwan plans to not only download the app himself but send a note to the bank’s 34,000 employees informing them of its release and encouraging them to do the same. This in-house correspondence complements the bank’s continued communication with its customers, including the more than nine million emails and 200,000 text messages it has sent out regarding its COVID-19 support measures thus far.
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MARKET RATE CUTS SHOW ‘PLENTY OF FIRE’ STILL IN MARKET than 50 lenders have cut at least one variable rate for new customers since 1 April. Nearly 60 lenders have cut at least one of their fixed rates, with the lowest at 2.09%. According to RateCity.com.au, when Homestar Finance reduced its Star Gold Home Loan rate to just 2.29%, this became the lowest advertised variable rate on the market. Research director Sally Tindall said the rate movements indicated there was still “plenty of fire” in the market and “competition between the lenders has continued to put downward pressure on home loan rates”. MORE
LOWER FIXED RATES STEAL THE SPOTLIGHT mid-March, fixed home loan rates have dropped lower than variable rates on average, possibly triggering a significant change in the Australian mortgage market. “With so many fixed home loans offering low interest rates, we might see a shift in Australia from a majority variable rate market to a predominantly fixed rate market,” said Mozo director Kirsty Lamont. “Many countries around the world have a majority fixed rate market, like the US where it’s common to have a 30-year fixed rate.” FROM
ONE THIRD OF AUSSIE HOUSEHOLDS WORSE OFF DUE TO COVID-19 Almost half of Australians over the age of 18 have reported being financially affected by COVID-19, according to an ABS survey revealed by the ABS in its second Household Impacts of COVID-19 Survey, the finances of 45% of Australian households were impacted in some way during the period from mid-March to mid-April. “One third of Australians (31%) reported that their household finances had worsened over this period, while one in seven (14%) reported an improvement,” said Michelle Marquardt, ABS program manager for household surveys. “One in 13 Australians (7.5%) said their household lacked the money to pay one or more bills on AS
time, and one in 10 (10%) had to draw on accumulated savings to support basic living expenses.” Just over a quarter of Australians (28%) said they had received the first one-off $750 support payment that was part of the government’s economic stimulus package. Those aged over 65 years were three times more likely to have already received the payment than younger Australians. “Around half (53%) of persons who received the economic support payment added it to savings, with persons aged 65 years and over more likely to do so than persons
aged 18 to 64 – 71% compared with 37%,” said Marquardt. In addition to quantifying the financial toll of the virus, the survey also collected information about Australians’ emotional and mental wellbeing over the period. “Compared to the 2017–18 National Health Survey, almost twice as many adults reported feelings associated with anxiety, such as nervousness or restlessness, at least some of the time over the last four weeks,” said Marquardt. “Adults aged 18 to 64 years were nearly twice as likely as those aged 65 years and over to experience feelings related to anxiety at least some of the time.” While fewer Australians have been able to see friends and family outside the home than in 2014, many used alternative ways to stay in touch while in lockdown during the first two weeks of April.
“We might see a shift in Australia from a majority variable rate market to a predominantly fixed rate market” Kirsty Lamont Director, Mozo
FINANCIAL IMPACTS OF COVID-19 ON AUSSIE HOUSEHOLDS Source: ABS Household Impacts of COVID-19 Survey, April 2020
indicated that their finances had been impacted in some way
reported an improvement in household finances
reported that their household finances had worsened
said they lacked the money to pay one or more bills on time
said they had received the first one-off $750 support payment
of those who received the support payment had added it to savings
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A G G R E G AT O R S
CONNECTIVE REBUILDS PROGRAM AROUND COVID-19 aggregator has deemed it “time for a longer-term and more holistic approach” to supporting brokers through COVID-19, redesigning and relaunching its learning and development program to better suit the current environment. Connective moved its meetings and events online as a “pragmatic response” to the introduction of social distancing measures but has also redone its L&D program given the ambiguity around how long isolation could last. “We’ve pulled our L&D program apart and put it back together in a way that makes sense in the middle of a pandemic,” said managing director Mark Haron. AN
ADOPTION OF ONLINE LEAD-GEN TOOL SOARS An aggregator has reported that adoption of its digital tool launched late last year has ‘skyrocketed’ in the era of COVID-19 social distancing restrictions My Lead Generator, introduced in October 2019, has now been activated by over 80% of the group’s network. The tool provides brokers with a unique URL to embed into their digital marketing channels, including their websites, social media accounts, email campaigns, Google Review pages, email signatures and referral partner marketing. The brokers can track the results across all platforms to learn which channels are most effective, a function that has proven “invaluable” during COVID-19, the aggregator said, as “brokers and customers alike are finding new ways to connect”. “This bespoke tool brings Loan Market brokers one step closer to LOAN MARKET’S
VOW FINANCIAL WELCOMES NON-BANK TO PANEL non-bank has joined the lender panel of aggregator Vow Financial. Brighten Home Loans will now be available to the group’s more than 1,200 brokers. “Mortgage brokers are in a prime position to drive competition and provide real choice for consumers looking for alternatives to the major banks,” said Brighten head of distribution Natalie Sheehan. “Vow’s brokers and their clients will benefit from our streamlined and reliable product offering, simple and competitive pricing structure, and superior service proposition assisted through our time-saving cloud-based technology platform.” A
becoming the 100% digital broker,” said the group’s chief marketing officer, Lisa Phillips. “Productivity is critical for the industry right now, which is why brokers are making it a standard inclusion within their digital marketing strategies.” Over the March quarter, the top three sources of leads generated through the tool were brokers’ own websites (59.4%), referral partners (16.7%), and Facebook (8%). Almost 50% of leads were first home buyers, and nearly 20% were ‘next home’ buyers, which, according to Loan Market, shows that both current and future mortgage holders are “extremely responsive” to the online experience. My Lead Generator also creates detailed customer profiles, including which market segment
the customer fits into, their motivation to buy, existing savings and the amount they want to borrow, among other factors. “With the amount of competition in the market, being able to humanise and personalise the digital experience is critical,” said Phillip. “For many brokers, lead generation is a highly timeconsuming experience, with many unable to track which lead source is the most effective. My Lead Generator allows brokers to simply demystify their strongest lead sources so they can do more of what works and ditch the rest. “[The tool] not only delivers quality leads to brokers through the two-step verification but also allows this to happen seamlessly and without contact until the broker is fuelled with the right information and customers want to receive the call. “In an era where the client experience is the differentiator, this advantage is a game changer.”
11/05/2020 2:07:14 PM
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REGIONAL BROKERS: TALE OF TWO SPEEDS While many capital city brokers are struggling under the weight of the files of customers who need urgent financial help, it’s a different story in regional Australia. Four brokers talk about their experiences of the regional mortgage market during the pandemic and show that location is no barrier to superior service and outcomes
often said in property circles that the market is operating at two speeds: one subsection is powering ahead and recording solid growth, while another is experiencing sluggish growth or perhaps none at all. When Sydney and Melbourne experienced booming market conditions in recent years, it was the perfect demonstration of this. While the capital city property markets surged, and APRA stepped in with heavy-handed policies and regulations to prevent a massive IT’S
at the 2019 Australian Mortgage Awards, runs his brokerage, Smik Home Loans, out of Lismore, NSW, where he says business has been booming in the last couple of months. “We’ve been extremely busy. We’ve got plenty of sales coming through, so it’s not just refinancing, but we’re in a different position being regional. People here are signing up for a lower-value loan, and when loans are smaller, people are a bit more confident about their capacity to repay,” Smith-Roberts explains. “Our average loan size is around
“I’m the typical mortgage broker that is too busy working in the business to work on the business, so I thought, this is an opportunity” Narelle Kerstan, Gloss Finance
Narelle Kerstan, Gloss Finance
bubble, other markets such as Perth, Adelaide and Darwin struggled to gain any price momentum. When this ‘two-speed’ trajectory is at play, it’s often capital city markets reaping the rewards, while regional areas are on the back foot. But in 2020, as the COVID-19 crisis continues to evolve, it seems that regional Australia is in a position to ride out this pandemic on a more solid footing. George Smith-Roberts, the Broker of the Year – Regional award winner
$280,000 to $350,000, and the loan repayments on a loan like this are around $300–$350 per week. This is a lot easier to manage on one income, and people who are picking up the government benefits like JobKeeper and Jobseeker are able to get by a little easier than others [in capital cities].” That’s not to say there aren’t people struggling in the country towns; every corner of the country has been impacted from an economic perspective, and where
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George Smith-Roberts, Smik Home Loans
Bradley Quilty, Tungsten Home Loans
Smith-Roberts is based in Lismore, inland from Ballina and Byron Bay on the northern NSW coast, it’s no exception. “We’ve had a small percentage of people requesting information on loan deferrals and hardship options, but given that our loan sizes are much lower, they’ve been a lot easier to manage,” he says. A similar situation is emerging in Canberra, says broker Craig Russell from Priority One Lending. In the first few weeks when uncertainty was high and there was speculation that the economic shutdown might linger for months, confidence was low, and Russell’s team spent plenty of time helping panicked clients assess their financial situation. But there was another group of borrowers making contact: those who could see some opportunities brewing and were keen to get into a position where they could take action. “I would say for the first two to three weeks, around half the calls I was getting were from people who were in trouble. They had lost their jobs completely or had a significant drop in income – one of my clients is a pro golfer and he was meant to play the Japanese tour, but that’s obviously not going to happen, so it was about helping these clients get clarity,” Russell says. “The other 50% of enquiries were from people who could see
opportunity. They wanted to take advantage of the share market, for instance, so they were looking to refinance and restructure to borrow extra money. People are always positioned differently, and while the cafes and the shops are closed, our client base is not retail or cafe-based. It’s professional-based, so we’re busier than we’ve ever been.” Russell says enquiries are coming in for a range of funding requests,
operators without staff in Canberra, and they say their business has fallen off a cliff. Speaking to our aggregator, he said that in some parts of regional Australia all activity has stopped, and there is nothing going on. But in other parts of Australia some people are busier than they’ve ever been. The pandemic is hitting differently in different areas.” Russell adds that his main focus is to demonstrate to clients
“People here are signing up for a lower-value loan, and when loans are smaller, they are a bit more confident about their capacity to repay” George Smith-Roberts, Smik Home Loans from residential and investment loans to commercial, cars and asset finance. “There’s been quite an uptake in people wanting more money overall, as our employment market is quite strong – it’s the medicos, the professional space, the public service, so they’re earning money and they’re sitting around at home, thinking, ‘I must get that done’, or ‘should we look at renovating?’” Russell says. “By the same token, I have spoken to a couple of brokers who are single
that he is “more than just a transactional broker”. “It’s hard to put a finger on why [some Canberra brokers are more successful than others], but perhaps for me, it’s because we have such a strong referral network. Almost 80% of our business comes from referrals, so that’s helping to keep things moving forward and keep the momentum going.” Another broker with a large number of clients in Canberra, Bradley Quilty, director and finance
manager at Tungsten Home Loans, also reports that business is coming in. Though he works out of an office on the Gold Coast, he built his brokerage in the nation’s capital and continues to service a client base that is largely settled in the ACT. “Activity hasn’t dropped for us – in fact, in March we were busier than we were in February. It doesn’t make much sense really!” Quilty says. “I’m sure at some point there’s going to have to be a decline; there are going to be businesses that are not able to reopen, and there has to be a recession coming. But most of our clients are in Canberra; they’re largely public servants and they all have secure jobs – most of them are OK and nothing much has changed.” Over the last couple of months, Quilty has seen sentiment turn from a position of fear and uncertainty to many clients readying themselves to take advantage of the opportunities that may arise in the next six to 12 months. “There was so much panic and fear at the beginning. We had a couple of clients pull out because of the uncertainty; we had one commercial SMSF client who pulled out, and then a few weeks later they decided they wanted to go ahead. By that stage, we couldn’t find a lender who wanted to proceed,” he says. “We have other borrowers who are getting their finances ready because they think the market is www.brokernews.com.au
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going to crash, and they want to get ready to buy when it does.” Meanwhile, down south – all the way across the Bass Straight, in Tasmania – the market is different again. Gloss Finance broker Narelle Kerstan, who won the Highly Commended, Broker of the Year award at the 2019 AMAs, says in Hobart her business has “slowed a little”, which she qualifies as going from working 60-plus hours a week down to around 40 hours a week. “I’m usually frantic, and when
average loan in her brokerage sitting at around the $340,000 mark. “Perhaps because people can survive off one income more easily here, compared to bigger loans in Sydney and Melbourne?” she says. “Or I wonder if perhaps the clients are just dealing with their lender direct, but my service model is quite personal, and I would think that because I base my service on being quite personal, they wouldn’t deal with it all on their own without reaching out. I’m not sure, but I’m
“While the cafes and shops are closed, our client base is not retail or cafe-based. It’s professional-based, so we’re busier than we’ve ever been” Craig Russell, Priority One Lending COVID-19 first hit and everything died down a little, I thought, ‘Wow, this is an opportunity!’ I’m the typical mortgage broker that is too busy working in the business to work on the business, so I thought, this is an opportunity to get stuck into those things I’ve been putting off,” Kerstan says. “But it was probably only quiet for about two weeks. I’ve now started getting refinancing enquiries, and while activity has definitely slowed, I’ve still got more than enough work to keep me busy.” Hardship loans and applications for deferrals have been few and far between, with just three clients approaching Kerstan for assistance in this area since the pandemic began. “Two of them had it pretty much sorted, and I was happy to sit with them and discuss other ideas, but they’d already spoken to their banks direct. The other client sent me an email, and as they were still working and not in dire straits financially, I explained to them the potential ramifications of deferring their payments, and they were happy to continue as they were,” she explains. “I found it really interesting that I’m reading all of this data, all of these stories saying that millions of loans have been frozen, but I’m not seeing any evidence of that in Hobart.” Kerstan points to the lower average loan size of her clients as being a potential driver for this, with the 16
Craig Russell, Priority One Lending
just not getting the enquiries.” In recent weeks, Kerstan has processed a number of loans for residential home purchases and blocks of land, but she admits that activity has fallen off by about two thirds. True to her decision to work on the business rather than in it, she’s been using her time wisely to clean up her database and reach out personally to clients who may need
some financial assistance in the weeks and months ahead. “I’ve been in this industry nearly 15 years, so I have a reasonable database and trail book. I spent a weekend putting together an email, explaining what fixed rates were on offer and how I could potentially help people into a new, better product, and I got about 10–15 responses. It was definitely worth my weekend, spending that time on
my database, as it well and truly paid off!” Kerstan says. “I’m still getting a fair few brandnew clients, and every day my phone still rings. Anyone who has been in the industry for at least 10 years may not be stressing, as their trail book should be able to sustain them. It’s the newer brokers I worry about; it’s very hard to drum up any new business right now, so you really need to be able to work your database.” AB
ACROSS THE REGIONS: BROKER PERSPECTIVES
Canberra: “In Canberra, it’s a bit of a bubble here! Our town is heavily backed up by the public service, and at times like this it becomes very noticeable. It was the same during the GFC; the impact here just wasn’t as bad as it was in other cities”
– Craig Russell, Priority One Lending
Lismore: “We haven’t noticed a drop in business at all, to be honest. Demand is still well and truly there, and we’re seeing a mix of everything – first home buyers, upgraders, downsizers and investors”
– George Smith-Roberts, Smik Home Loans Hobart: “The clients who are calling me right now with loan enquiries are also ringing to check on me. I tell them, yes, business has dropped, but I’ve got enough work to keep me busy. It’s just really lovely that clients will check in like that”
– Narelle Kerstan, Gloss Finance
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NE WS ANALYSIS
IS THE ECONOMY READY TO EXIT HIBERNATION?
At the height of the uncertainty driven by the COVID-19 pandemic, there were fears that the economy could be stalled for at least six months – perhaps longer. Now, leading economic experts are suggesting the peak of ‘hibernation mode’ could already be behind us
the end of March and into early April, when the Prime Minister and Treasurer were announcing mounting restrictions on socialising, and discussing the economic shutdown in parameters of months, not weeks, it was hard to see when an end to this pandemic could be in sight. “We will be living with this virus for at least six months,” PM Scott Morrison warned ominously, “so social distancing measures to slow the spread of this virus must be sustainable for at least that long to protect Australian lives.” There was no reading between the lines necessary, as ScoMo was making it very clear: we’re effectively shutting down the country for a minimum of six months, and we’re prepared to keep it closed for even longer if we have to. Incredibly – some might even say miraculously – we’ve avoided a health crisis in Australia, with the growth in coronavirus cases nationwide slipping to a rate that is the envy of other countries. The single-figure totals reported in relation to growth in the number of cases include many states that are recording zero new cases day after day. As a result, the ending of this economic catastrophe could be approaching sooner than we think – or, rather than an ending, we could see the beginning of a new way of doing business. Business and financial commentator Peter Switzer, founder of the Switzer Group, believes the stock market is starting to build in an expectation of the economy rebuilding, and he has his money on a return to busy offices and many AT
corporate workers being back at their desks within a matter of weeks. “My local coffee-shop owner in Sydney’s CBD opened up again … after a three-week shutdown. Sue, the owner, told me that we wouldn’t be back to normal for her business for a year! The poor woman is a victim of the media and their perpetual preoccupation with worst-case scenarios,” Switzer explained in a briefing. “I felt so sad for her. I told her that her building, usually full of coffeeaddicted office workers, would be back and buying by some time in June. She loved hearing this – it gave her hope. And I think I’ll be on the money with my prediction, and world news sources are backing my big call. If I’m right, all of these woefully scary predictions about big bank losses of $35bn will be wrong.” What makes Switzer so confident of a strong economic return? First, he points to some numbers. The Australian dollar is a proven test of market sentiment, Switzer says. On 23 March it hit a fresh low of US$0.54, and by the end of April it was back up to nearly US$0.65. “The confidence pendulum is swinging to the positive, and only a second wave of scary infections will derail this positivity,” he says. “If there is no significant second wave, then the scary predictions of a deep recession, 10% unemployment, a 40% collapse in house prices and banks facing $35bn worth of losses will all be BS, to put it crudely.” At this point it’s important to remember that Australian banks are, historically, extremely profitable, so even a massive fall in profits as most of the big four have announced in
Ian Pollari, head of banking, KPMG Australia
“The majors have the opportunity to use COVID-19 as a catalyst to accelerate their digital transformation, simplification and operational resilience efforts” Ian Pollari, head of banking, KPMG Australia recent weeks can be buffered by huge profit reserves. Just look at the stats: KPMG’s Major Australian Banks Half Year Analysis Report 2020 found that the majors reported a combined cash profit after tax from continuing operations of $8.3bn, down 42.6% on the same period in FY2019. The Australian economy faces an unprecedented level of uncertainty surrounding the size and duration of the financial downturn resulting
from the COVID-19 pandemic, and 2020 will be a year when the majors will play “a critical role supporting the economy to withstand the impact of the crisis and to help in its recovery”, says Ian Pollari, KPMG Australia’s head of banking. However, it’s against this backdrop of lasting profits that the major banks have recorded their recent dip in profitability. Revenue and margin pressures continue, with elevated cost bases www.brokernews.com.au
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KPMG’S MAJOR AUSTRALIAN BANKS HALF YEAR ANALYSIS REPORT 2020: KEY HIGHLIGHTS
Total operating income (cash basis) declined by 3% to $39.9bn, reflecting subdued lending conditions and a continued squeeze on margins.
The majors grew their mortgage books by a combined 2.7% in HY2020, with non-housing lending growing by 5.2%.
The big four reported a cash profit after tax from continuing operations of $8.3bn, down 42.6% compared to the first half of 2019.
Cost-to-income ratios have increased from an average of 46.1% to 54.8%, reflecting the costs of large and ongoing customer remediation and regulatory programs.
Peter Switzer, founder, Switzer Group
and deteriorating asset quality impacting negatively on industry returns. But the big four banks are facing these exceptional circumstances in a relatively strong position – from a liquidity, funding and capital perspective – compared to during the GFC. “The biggest challenge for the major banks will be balancing the necessary support for the recovery effort and in doing so, restoring their reputations, whilst at the same time navigating a number of structural headwinds,” Pollari says. “It is clear that the effects of this crisis will be long-term and profound in terms of impact. However, the majors have the opportunity to use COVID-19 as a catalyst to accelerate their digital transformation, simplification and operational resilience efforts.” Hessel Verbeek, KPMG’s strategy partner, banking, added that while the major banks have proven resilient so far, it is “too early to estimate the full impact of the COVID-19 crisis” on their 2020 performance. “The majors will have to contend with the demands of customers who want relief from loan repayments, a government which wants credit made available, a regulator which 18
wants unquestionably strong balance sheets and shareholders who want strong profits and dividend payouts,” Verbeek said. At the end of April, NAB revealed that it needed $3.5bn in capital to get through the next six months in particular, and that an 83 cents dividend “was going to be butchered by 64%, down to 30 cents”, Switzer points out. “That would have shocked dividend-collecting investors and retirees who love bank dividends. But this is what happens when GFC-style crashes come along, and that’s what we’ve prepared ourselves for with this damn pandemic, which has bred lockdowns and closures of our economies,” he explains. Furthermore, he notes that much of the forecasting and predictions being reported in recent weeks have been “Armageddon stuff ” that both the stock market and Switzer himself “don’t believe will be the reality”. “NAB’s dividend cut is understandable, but if we continue to kick the coronavirus’s butt, our economy will recover quicker than expected and the economic and income losses of March through to June will be gradually offset by
Aggregated loan impairment expenses have increased by 226% to $5.7bn, reflecting both the impact of COVID-19 and broader credit deterioration.
Credit quality has been negatively impacted by the early onset of the crisis, leading to an increase of 29.5 basis points in impairment charges as a percentage of gross loans and advances.
“The confidence pendulum is swinging to the positive, and only a second wave of scary infections will derail this positivity” Peter Switzer, founder, Switzer Group rising incomes, unbelievably low interest rates and a pipeline of government stimulus on steroids that could propel our economy into a very strong financial year from 1 July 2020 to 30 June 2021,” Switzer says. “That could happen if the months of January and February keep the
March quarter positive and the June quarter is the only one that ends up being a big negative. I guess if we get back to work in June, then the July–September quarter could sneak into the positive. For that to happen, we’d have to see no significant second-wave infections – and that’s a threat that the stock market
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is betting against right now.” Shane Oliver, head of investment strategy and economics and chief economist at AMP Capital, has adopted a similarly optimistic view. In Australia, the ABS survey of household coronavirus impacts reveals that millions of households are financially worse off, with 10% drawing down savings, a quarter receiving government payments, and a doubling of the number of people feeling nervous or restless. “Surprisingly, though, only 3% have reduced home loan payments,” he explains. “Credit growth also surged in March, although this was all due to a surge in lending to businesses as the shutdown hit. The terms of trade rose in the March quarter, providing an income boost to the economy, and it also looks like net exports contributed positively to March quarter GDP growth.” In addition, the ANZ-Roy Morgan Consumer Confidence Index rose for the fourth week in a row at the end of April and has now recovered nearly half of its coronavirus-related plunge. The outlook for the economy, Oliver argues, isn’t as dire as many had predicted. “After a strong rally from March lows, shares are vulnerable in the short term as economic data to be released over the next month shows the devastating impact of the coronavirus-related shutdowns. But on a 12-month horizon, shares are expected to see good total returns, helped by an eventual pick-up in economic activity and massive policy stimulus,” he explains. “Provided we are right and shutdowns ease in the months ahead, resulting in April or May proving to be the low point in economic data, then given the massive policy stimulus, shares should be able to resume their rising trend and so we retain a positive 12-month outlook.” The Australian housing market is weakening in response to the coronavirus, with social distancing driving a collapse in sales volumes, and “a sharp rise in unemployment and a stop to immigration through the shutdown posing a major threat to property prices”, Oliver says. “Prices are expected to fall between 5% to 20%, but government support measures
Shane Oliver, chief economist, AMP Capital
“This has so far turned out a lot better than feared in March, when share markets had fallen around 35% and the worry was of a much longer lock downturn” Shane Oliver, chief economist, AMP Capital including wage subsidies and bank mortgage payment deferrals, together with a plunge in listings, will help limit falls at least for the
next six months,” he predicts. “This has so far turned out a lot better than feared in March, when share markets had fallen around
35% and the worry was of a much longer lock downturn, which would have had a far bigger impact on economic activity,” he adds. “In Australia the official talk was of a lockdown or hibernation of at least six months. The last time Australia’s PM referred to a six-month hibernation was back on the 7th April. If the lockdown starts to ease through May as appears likely, then it will have lasted two to three months depending on when measures are completely relaxed, implying a smaller hit to the economy than originally feared.” AB
3 BIGGEST RISKS OVER NEXT QUARTER
First – a second wave of coronavirus cases. “This should be manageable with ramped-up testing, quarantining and contact tracing as per the app Australia is deploying, but the US is perhaps most at risk on this front.”
Second – collateral damage from the shutdowns. This will come in the form of permanent company closures and rising defaults. So far so good, but it’s early days, and this will be critically important in terms of the speed of the recovery.
Third – an escalation in US/China tensions. Given the hit to the US economy and its very poor performance in managing the coronavirus, President Trump will find it hard to get re-elected and will be tempted to ‘wag the dog’ in order to rally around the flag and distract voters. A fight with China over the source of the virus may be part of this and looks to be starting to escalate already. Source: Shane Oliver, head of investment strategy and economics and chief economist, AMP Capital
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E VENT RE VIE W
BROKER CONNECT The inaugural Broker Connect virtual event held on Friday 8 May was a huge success, connecting hundreds of lenders, brokers, service providers and other industry players and sector professionals
a platform that brings together mortgage brokers, business development managers, bank representatives and other key insiders, the first-ever Broker Connect event hosted by Australian Broker, Mortgage Professional Australia and NZ Adviser, aimed to provide a valuable space for industry players to network and do business. The keynote presentation saw panellists debate a topic that everyone has been impacted by, asking the question: how has the coronavirus pandemic changed – and how will it continue to change – the way we operate? COVID-19 has ripped through the global economy and changed business and life as we know it, with a particular impact felt by mortgage brokers, who are helping their clients survive through difficult times, while also navigating a rapidly changing industry. All of which means there has never been a more important time for brokers to secure their business activities, identify new areas for market growth and prove their value to clients by delivering comprehensive, trustworthy information during a period of great uncertainty. Aaron Christie-David, managing director and finance AS
broker at Atelier Wealth, was one of four experts on the panel discussing the immense impact COVID-19 has had. He shared that one of the key principals driving his business forward at this time is the idea of everyone working to their “highest and best use”. “We’ve had to get very clear on who does what, who is best to do a task and who specialises in a certain
Stephen Hale, head – marketing and communications at the MFAA; and Nancy Youssef, founder of Classic Finance. Youssef spoke to the fact that everybody was in the same boat, and hopefully we would all come out on the other side of this crisis bigger and better – but she said it was totally understandable that we were going to have some harder days along the way.
“We don’t need to entirely pivot and reshape what we’re all about; pivoting is good, but adaptability is better” Nancy Youssef, founder, Classic Finance area,” Christie-David said. “We’ve also embraced an abundance mindset: there is plenty of business still out there, so it’s up to us to be high-tech and hightouch. We do Zoom meetings with clients, Google Hangouts with our team, send a ‘thank you’ card in the mail, schedule FaceTimes with clients and send letters to clients.” Alongside Christie-David, other panellists included Josh Bartlett, managing director of the Mortgage Advice Bureau – Melbourne;
“What I’ve realised is that we need to be agile. That doesn’t mean we need to entirely pivot and reshape what we’re all about; pivoting is good, but adaptability is better,” Youssef said. “So can we look at changing components of what we do, while still sticking to our core ‘why’ and purpose? A lot of innovation comes with this way of thinking.” The first of many virtual broker events, Broker Connect was attended by hundreds of brokers and industry
professionals from across the country on Friday 8 May. A number of lenders were represented at various exhibition stalls, including Bendigo and Adelaide Bank, which has been actively engaging with small business customers and liaising with the broker community to help clients weather the COVID-19 storm. “Our commitment to our customers and their communities has always been to support them through both the good times and tougher times,” says Marnie Baker, managing director, Bendigo and Adelaide Bank. “Small businesses are the engine room of our economy, employing millions of our fellow Australians, and their success feeds into everyone’s success. We are open for business, and as an essential service it’s vital we provide our customers with the dedicated and necessary support they need.” Another key sponsor of the event, Resimac also took the opportunity to network with brokers and update them on some of the questions it has been fielding from customers, as well as provide information on the policies and initiatives the non-bank has introduced in an effort to assist them.
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BIG ISSUES DEBATED AT BROKER CONNECT
The lowdown on securing operations and critical business activities
How to optimise remote working arrangements
Strategies for generating new revenue streams
Ways to grow your business in a digital environment
Analysis of the future of the mortgage industry post COVID-19
“It’s hard to believe that in the space of just a few weeks we’ve seen such a dramatic impact on our lives … to restrict the spread of COVID-19 in Australia,” said Resimac CEO Scott McWilliam. “Resimac has been committed to supporting its customers through
the good and bad times for the last 35 years, and we know that the next few months will be filled with uncertainty as we adapt to the ‘new normal’ of social distancing and interruptions to both work and family life … [but we] assure you that we’re here to help.”
Uniting the industry as Australasia’s leading networking forum dedicated exclusively to helping brokers and mortgage professionals connect, communicate and transact, Broker Connect was not just a webinar, or a livestream. Rather,
it was a unique and interactive virtual event, which is also approved for five CPD credits by the MFAA and FBAA. The next Broker Connect event will be held on 19 June. Visit http://tiny.cc/broker-connecttiny.cc/ broker-connect. AB
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Have an interesting deal? Had a particularly difficult or interesting deal? Why not share it with us? Email:
A home loan is never as simple as the components at play. For instance, you may have a high-net-worth client with a stable career and a strong income, but that doesn’t necessarily mean that finance approval is a shoe-in, as Luke Heavey, senior finance consultant at Orium Finance, explains THE FACTS
Client High-net-worth property owner
Loan size $1.3m refinance; $800,000 cash-out
Goal To refinance PPOR loan and extract equity for investment
Location Lower North Shore, Sydney
A lot of our business comes via referral, and that was the case with this particular client. I met them through our network when an existing client personally referred him to me. The client had substantial equity in his owner-occupied property – more than $1.5m. He was managing investments for an international fund and had a very strong profile and background; however, he was going through a job change. The client was weighing up whether to invest in shares or property, but his highest priority was flexibility so he could move fast and make swift decisions if required. He was running a share portfolio, which he wanted to retain, but he had noticed that the market had started to plateau, and he wanted quick access to funds to purchase land, a unit or shares. He was trying to decide between property and shares for his next move, but he kept coming back to the fact that, if he decided to pursue a property investment, he wanted the flexibility and agility to be in a position to respond quickly and make a strong offer, once he found the property he wanted to purchase. To facilitate this, the client required a large cash-out from his owner-occupier loan. We processed a refinance to extract equity from his PPOR loan to give him full flexibility in his use of the funds. He wanted access to $800,000 in total, which we arranged for him, and ultimately we went with Macquarie Bank for the finance. 22
Lender Macquarie Bank
The challenge with most lenders is that many of them create restrictions around the release of funds, as they prefer the bank to hold full control, and this can
factored into the transaction. The client requested the funds be flexible and ready to draw at request. Some banks apply covenants and require details of the investment, which can restrict the timing and potentially the opportunity. Given the range of events and the request from the client, many banks would not have been able to facilitate the transaction without having control over the funds or lending. My understanding of all the banks’ policies helped overcome the client’s funding issue, as I was able to match him with a lender (Macquarie Bank) that recognised his position and understood the reasons why flexibility of the funds was required. Also, the bank recognised that the client’s financial position was more than adequate, which meant it was comfortable about processing the transaction with a quick turnaround. Macquarie understood the industry and the client profile, which made this bank the ideal funding partner for the loan. At the time, the interest rate the client was moving to under the refinance was
Finding a lender that understood our client’s position and requirements, and where we could demonstrate they could make the transaction as easy and seamless as possible, was essential to get the deal across the line
Luke Heavey Senior finance consultant, Orium Finance
create potential delays. Finding a lender that understood our client’s position and requirements, and where we could demonstrate they could make the transaction as easy and seamless as possible, was essential to get the deal across the line. The client was also worried that his recent job change could have the potential to impact the scenario. This is a common concern among borrowers, and it’s a valid one, as banks and lenders are looking for job security and continuity of employment when they assess a loan application. I assured him that his recent job change wouldn’t impact his application, given it was a transfer within the same industry and his income level hadn’t changed. I also advised that the bank would consider all previous income being
also a significant decrease from what he was paying previously, so the deal put him in a better financial position overall. THE TAKEAWAYS
Assessing the client’s individual needs is the first step of the process, but matching them to a lender that will work with them and help them reach their outcome is key. Most banks have policy niches and professional niches. It’s always important to educate the client on each bank’s strengths and weaknesses when it comes to policy and professional specialists. It’s about understanding each bank’s strengths and weaknesses, as this enabled me to facilitate a seamless transaction and provide my high-net-worth client with a great outcome. AB
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COMMERCIAL LENDING STILL GOING STRONG The impact of coronavirus is being felt by the commercial property market, and there is little doubt that the economy is suffering as a result. But that doesn’t mean brokers should consider commercial lending a dead prospect a challenging landscape, the commercial lending arm of our business has continued to thrive. Just like in the residential arena, brokers provide genuine choice – and this is a vital and missing ingredient in commercial lending. Brokers introduce to clients a vast array of products, services and fintech lenders that borrowers may not be able to access by going to a bank. The tightening of lending criteria that occurred after the banking royal commission made it harder for commercial borrowers to access finance, but brokers worked hard to find solutions to suit their customers’ needs. When the dust began to settle, our country experienced the most devastating bushfires in living memory, but still, brokers pushed through. Now, as the COVID-19 situation unfolds, we as an industry can expect to face further challenges. However, by remaining agile and continuing with our free-thinking approach to finance, Liberty is well placed to support brokers to come out on top. For example, Liberty has been accepted into the Australian government’s SME Guarantee Scheme and has launched an unsecured loan product to support affected businesses, providing loans of up to $250,000 for a maximum of three years. Our new Business Care product offers the option to defer repayments for the first six months, until small business owners are back on their feet. With a growing market, an increasing number of mortgage brokers are stepping into the commercial lending space – and they’re being rewarded for doing so. Part of the reason we’re seeing more brokers moving into this area is because there are so many opportunities. From opening new shopfronts to purchasing office space, there are many reasons why a customer may seek commercial finance, and there is
certainly no shortage of customers. Given the unprecedented nature of the virus, there is no telling just how serious the effects on our industry will be. As the COVID-19 situation has unfolded, we have maintained regular communications with our business partners. Although we cannot currently meet face-to-face, we still strive to achieve personalised contact through video chats and digital platforms. While it is certainly an unusual time, most brokers are in a fortunate position of being able to continue operating without the same level of disruption that many
is far from crowded. This means there is ample opportunity for ambitious brokers to move in and make a difference. The fact is, residential is a supercompetitive market, and it can be difficult for brokers to compete with some of their more established competitors, especially if they are just starting out. With plenty of room to move, commercial lending can be an excellent way for brokers to boost their business and break into a relatively underserviced market. At Liberty, we promote the benefits of commercial lending with training events
Broker market share of commercial lending is comparatively low – and the market itself is far from crowded. This means there is ample opportunity for ambitious brokers to move in and make a difference
John Mohnacheff Group sales manager, Liberty
other industries will face. Although there are likely to be interruptions to some degree, technology allows brokers to work remotely, while still engaging with customers over the phone, via email or through video chat. We truly believe in the value of diversification, and our BDMs are always available to support business partners in moving into other areas of lending. Currently, the broker channel holds the highest market share of residential home loans on record, sitting at close to 60%. With the steady demand for specialised lending support, we can expect this uptick to continue. However, despite a steady increase in the number of brokers moving into commercial lending, broker market share of this type of lending is comparatively low – and the market itself
and workshops, like our ‘Do More’ sessions. These sessions explain the fundamentals of commercial lending, and support brokers in taking the first steps towards moving into this area. If you’re considering breaking into commercial lending, there’s never been a better time to take the plunge. Those who get in early are likely to see the greatest gains. At Liberty, we know there can be anxieties around moving into new areas of lending, which is why our BDM team offers extensive support to brokers through the transition period and beyond. Like learning any new skill, it’s important to receive the best training and support. We have more BDMs than any other non-bank lender, so we’re equipped to take a hands-on approach and offer the personalised support brokers need to succeed. AB www.brokernews.com.au
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Get involved in the discussion Share your thoughts at
FROM THE FORUM
Top comments from trending stories on brokernews.com.au
BIG FOUR INTENTIONALLY MUDDY MORTGAGE PROCESS The ACCC Home Loan Price Inquiry interim report has found that a “lack of price transparency” by the banks makes it hard for consumers to compare different mortgage products and switch to a loan that better meets their needs – something the brokers in our comments section wholeheartedly agree with. At the end of September, customers with new owneroccupier loans with principal and interest repayments were paying, on average, 26 basis points less than customers with existing loans; the difference grows even wider for customers with older loans. Frustratingly, the report also found that headline rates did not accurately reflect the price most customers actually paid for their home loans, as the “overwhelming majority” received discounts, including “opaque” discretionary discounts. Thanks for stating the bleeding obvious, ACCC; however, what this report misses is the obvious skill that a good broker possesses and the process that we go through to navigate our way through this deliberately designed mess in our client’s best interests – yes, best interests – to find them a competitive deal, taking all the moving parts into consideration. The easy solution to this deceptive and misleading pricing is to ensure that the tools of deception known as pricing calculators are banned outright. All lenders outside of the majors and their subsidiaries advertise their rates on their websites; what you see is what you get and that should be an industry standard.
MAJOR TO REFUND INTEREST ON DEFERRED REPAYMENTS CBA has announced that it will make payments to offset the interest costs that will accrue for customers who have been granted a six-month deferral on their home loan repayments due to the COVID-19 pandemic. On an average loan of $350,000, CBA will refund approximately $45 to offset the effect of “interest on interest over the six-month period”, the bank said.
Yes, we knew this. That’s why it is so important that unlike Labor, the government and organisations like Choice (magazine) don’t try to remove the filter known as brokers, who clear the waters for consumers and make the process transparent. We give you better water. Steve
Let’s be serious, lenders! What percentage of Australian mortgage holders are not going to be affected by COVID 19? For those that aren’t: great business as usual. For those that are: capitalise interest (user pays more). Sorry, banks make more! If lenders are serious about assisting Australians ... take the New Zealand approach. Absorb some of the billions in profit for six months! After all, everyone is suffering here in one way or another.
Finally the ACCC realises that the pricing of mortgage products is not as simple as they first thought and is impossible to navigate without the assistance of a reputable and experienced mortgage broker with the aid of sophisticated aggregator software. Wait until the ACCC tries to match the preferred rate and product with the plethora of lending policies of the vast number of lenders... and the varied processing times... and the varied credit histories of the borrowers... and detailed assessment of the borrowers’ living expenses... Good luck, ACCC!
The interest on interest is not just for the six months. Won’t the interest on interest be applicable for the remaining term of the loan and be more than $45 on a $350k loan? Andrew
@Andrew, I think because the credit offsets the additional interest immediately, it is no longer applicable to the remainder of the loan.
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11/05/2020 2:19:22 PM
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BROKER ON BROKER This isn’t the first time Natalie Sheehan, head of distribution at Brighten Home Loans, has witnessed major disruption to the economy and the mortgage industry – and it won’t be the last. She shares her advice and insights to help brokers not just survive the pandemic but come out the other side batting to win
What advice are you providing to your brokers, particularly those who are newer and dealing with a massive economic upheaval for the first time? must admit, when I went A Ithrough the GFC I thought: how is this going to change the landscape of finance in the future? Will business be the same? I saw a number of large non-banks stop funding, others went into shutdown mode, and brokers were really uncertain. That’s what’s happening now, and there’s a really
You’ve got a great opportunity to work on your business rather than in your business. Do you have a business plan? A strategy for what type of product you want to be offering post-COVID? Have you ever looked into asset finance, or nonresident lending, or low-doc loans? Use this time to do additional training and fine-tune your offering. The value you can get from attending a webinar right now is fantastic. They are so efficient; you can access 40–60 minutes of dedicated content without having to drive anywhere, and you can
“The times of writing a three-year business plan are gone … now you really need to have a strategy and the ability to pivot” high level of insecurity, and for newer brokers who haven’t been through the GFC or a big economic shift, you can really look to people who have been in the industry a long time for guidance. My advice is to be really authentic and give your clients a level of understanding of what you’re doing and how you can help them with their current challenges. As an MFAA and FBAA accredited mentor under the More than Mentoring program, what is one piece of advice you believe every broker should follow right now?
get some great contacts potentially with other brokers and BDMs. Is it possible to lead-gen at the moment, and if so, how? I A definitely think it is. The way brokers traditionally generate leads is through networking events, knocking on doors, asking for referrals from existing customers or referral partners, and through social media. All of that is still available; it’s just accessed differently. Instead of knocking on doors, reach out digitally – I’ve seen some fantastic examples of brokers putting together video updates on what’s happening in
Natalie Sheehan, head of distribution, Brighten Home Loans
the market, and becoming a resource for their clients. Right now there’s so much complexity in lending, and customers need brokers more than ever. Everyone is disconnected and isolated, so picking up the phone and calling someone in your network goes far. What is the best approach for brokers to build a sustainable business and loan book in this COVID-19 economy? People think it’s impossible to A business-plan at the moment, but it’s actually about looking at what your strategy is. The times of writing a three-year business plan are gone; with the rapid changes we’ve
experienced over the last two years, regardless of the COVID-19 pandemic, now you really need to have a strategy and the ability to pivot, and that becomes your business plan. What is your final tip for brokers? Always look at the opportunities A – there are a lot out there at the moment. Over 45% of adults in Australia have been affected financially by this pandemic, so people are looking for help. They need someone who can hold their hand, help them with their financial strategy and help them find the opportunity in this market. AB
PITSTOP MENTORING Are you new to the industry, or simply keen to learn from experienced brokers who have words of wisdom to share? This is your opportunity for pitstop mentoring! If you have a question you’d like a senior broker to answer, contact us and look out for an expert answer in a future issue.
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11/05/2020 2:19:51 PM
Supply expected to pull back and cushion Adelaide against a substantial drop The recovery of the rental market is being cut short for Adelaide as tenants come under the financial strain of the pandemic. Peter Koulizos, Property Investment Professionals of Australia chairman and lecturer in property at UniSA Business School, says an already-fragile rental climate will take another hit as leases expire throughout the year. “There will be less demand from people looking to rent as young people look to move back into home or share house arrangements, and people on temporary visas look to consolidate their accommodation situation,” Koulizos says. “Market rents have already dropped by 5% to 15%, and I expect this to continue in the next few weeks and months,” he adds. CoreLogic’s Home Value Index for March reports that Adelaide’s values over the quarter increased by 0.6%. Considering that the selling market will pull back, Koulizos says he expects the COVID-19 crisis to result in less than a 5% drop in values. Area
A long-term spell of decline across Perth show first signs of slowing Perth blazes on in securing its forecast growth position. Values increased by 0.5% in March and regions that have long come under the thumb of a downturn shifted into positive, as per CoreLogic’s Home Value Index. However, director of Property Predictions Brendan Kelly says that while Perth is showing encouraging signs, its climb could be pushed back. “Annually, prices have been declining by around 5.5%. However, month-on-month declines had reversed, and prices were seen to be increasing leading into April,” Kelly says. “Growth is likely to pause during the coming six months, due to the virus, before increasing again in the following 12 months.” Herron Todd White’s April Month in Review notes heightened investment in natural resources, future employment opportunities, and a “rebounding of vacant land prices” as positive trends. While it points to some experts forecasting a “mini-boom” as a result, COVID-19 is expected to disrupt interest from first-time buyers and reduce travel to Perth. Area
A SILVER LINING FOR SYDNEY Opportunities abound in Sydney as the market braces for economic impact seems like the housing market may be back on track in Sydney, with the city recording 1.1% growth in values over March, as per CoreLogic’s Home Value Index. “Sydney’s more exclusive properties will suffer [from the impacts of COVID-19] as normally happens when the stock market collapses,” says Michael Yardney from Metropole Property Group. “However, well-located apartments and A-grade homes in middle-ring suburbs should hold their own, falling around 5% in value.” In the March quarter, values increased by 3.9%. And while concern simmers over how property values will pan out, Rich Harvey, buyers’ agent and CEO of Property Buyer, says the low number of listings is helping to hold property prices up. “In the next few months ahead, there will be some excellent buying opportunities for savvy IT
buyers prepared to buy despite the uncertainty in the economy,” he says. Off-the-plan market muted Adding to construction concerns, off-the-plan properties are facing lending restrictions. “Many of those who purchased off-the-plan properties in Sydney a few years ago are now having trouble settling, with valuations on completion coming in at well below contract price at a time when banks are more reluctant to lend on these properties,” Yardney says. According to Herron Todd White’s Month in Review for April, uncertainty around settlements for new units continues to present challenges in this market, but supply has more recently eased. “Certain suburbs also had a large supply of new units reaching settlement at the bottom of the market after being purchased off the plan at the height of the market,” the review notes.
NSW’S RENT RELIEF PACKAGE Source: NSW Treasurer Dominic Perrottet
The NSW state government announced a $440m package to help landlords and tenants affected by the restrictions caused by COVID-19 $440m
Around $220m is going to the commercial sector, and a further $220m is expected to benefit residential tenants and landlords 50/50
The announcement provides a 25% land tax rebate or waiver for landlords who pass on an equivalent amount of rental relief to their tenants
The state government is also deferring land tax payments for three months 3 months
Commercial landlord relief will apply to business tenants with a turnover of less than $50m who experience a 30% decrease in revenue due to COVID-19 30%
SUBURB TO WATCH: HORSLEY Median price (houses) $642,000
Median price (units) $515,000
Indicative gross rental yield
Average annual growth
Weekly advertised rent
Indicative gross rental yield
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AUSTRALIAN CAPITAL TERRITORY
Wages growth gives Canberra an edge as COVID-19 clouds near-future progress Earlier this year Canberra joined the string of capitals where record-high growth trends had swept in, and, more recently, CoreLogic’s Home Value Index reported that values had increased by 0.6% in March. “Looking back over the past three years, the market has shown consistent growth, and this is predicted to continue and further improve once economic and social conditions improve once again,” says director of Property Predictions Brendan Kelly. According to Herron Todd White’s Month in Review for April, “the high median income keeps property prices on the high comparative to the rest of Australia”, and first home buyers are most attracted to property priced at under $600,000 – a trend that will likely continue. “As the primary employer for the ACT is the government, it is likely that most households will remain financially stable, reducing the impact on price variance over the lockdown period,” Kelly says. Area
Value uptick suggests dawn of a recovery, but broader concerns loom in Darwin
HIGHEST-YIELD SUBURBS IN NSW Suburb
Affordability continues to reign in the Top End with a further slash to the cash rate by the RBA. But while the start of the year saw Darwin lose traction, its tide may be turning, as values rose by 2.0% in March, as per CoreLogic’s Home Value Index. “March’s significant price increase and a lift in quarterly values could be a sign of conditions starting to level out for Darwin and its surrounds,” says Property Predictions director Brendan Kelly. “If this is the case, it will be a welcome change for the Northern Territory. Trends in median asking prices, however, suggest that this lift may be short-lived.” Herron Todd White’s Month in Review for April points out that Darwin’s lack of population growth means fewer buyers. Future projects are expected to instil confidence in time, but in the short term “this leads to a reduction in prices across all sectors of the Darwin property market”. A greater player now is the health crisis, which will likely take a toll on tourism and local businesses. Area
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The Sunshine State continues to defy the odds of a pandemic-induced downturn Looking at the March figures, Brisbane property continues to perform well, with CoreLogic’s Home Value Index reporting a 0.6% lift in values, bringing the median house price up to $506,553. The balmy capital’s oversupply is waning, and it’s forecast that by the end of this year heightened buying interest will outweigh available dwellings. COVID-19, however, threatens to decelerate the capital’s absorption of newly built properties and momentarily unsettle its economic core. “In general, Queensland is highly exposed to the Chinese economy, in particular tourism, education and foreign property purchases,” says Metropole Property Group CEO Michael Yardney. “This means that the Queensland property markets are likely to suffer. But as opposed to regional Queensland, the Brisbane real estate market is underpinned by multiple pillars and is therefore likely to suffer less than the Gold Coast and Sunshine Coast or regional Queensland.” Median
This week, 590 capital city homes were scheduled for auction, with preliminary results returning a 59.6% clearance rate. The previous week saw 413 homes scheduled for auction and a final clearance rate of 41.1%, with the lower volumes likely due to Anzac Day commemorations. One year ago, there were 1,479 homes taken to auction and a 52.5% clearance rate. It’s likely the number of scheduled auctions will remain substantially lower than normal, at least until social distancing policies are lifted and onsite auctions can resume. With fewer scheduled auctions, we should see the withdrawn rate start to normalise, which could have a positive flow-on effect on the clearance rate. It has been dragged lower over the past month due to a surge in auction withdrawals, which are counted as unsold in the clearance rate statistics. As we’ve seen over the last few weeks, the number of auction results collected at a preliminary stage are lower than usual as we seek to confirm the status of scheduled auctions, so results should be interpreted with caution.
PERTH Total auctions
Perth Combined 5 capitals
CAPITAL CITY HOME VALUE CHANGES
Sydney Melbourne Brisbane
There has been a change in sails for Hobart as CoreLogic’s Home Value Index reports that it was the only capital city market across the country to decline in March. It experienced a -0.2% dip in values, a cool change from its 0.8% rise in February. “Leading into April, real estate agents in Hobart had remained somewhat optimistic despite the results coming from sales figures,” says director of Property Predictions Brendan Kelly. “And as yet, growth in regional areas has remained relatively solid.” Hobart has displayed the tightest rental conditions in Australia, with CoreLogic reporting that rents have been lifted “by an average of 3.4% over the past twelve months”. Herron Todd White’s Month in Review for April says COVID-19 has pushed holiday rentals across to the long-term market, but if the crisis has a longer run, the capital’s tourism sector will take a hard hit and “the job losses could result in a sharp downward correction in pricing for an extended period”.
Tight rental conditions in Hobart could be alleviated as the short-term market thins
MEDIAN HOUSE AND UNIT PRICES
WEEK ENDING 4 MAY 2020
CAPITAL CITY AUCTION CLEARANCE RATES
*The monthly change is the change over the past 28 days
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BRISBANE CANBERRA Total auctions
SYDNEY Total auctions
MELBOURNE Total auctions
Melbourne peddles up incline as COVID-19 probes capital’s resilience Melbourne saw another increase in home values in March, with a rise of 0.4%, as per CoreLogic’s Home Value Index. CEO of Metropole Property Group Michael Yardney says values last year recorded “the strongest resurgence on record to reach new peaks in March”. But now, “the Melbourne housing market will be affected by fallout from the COVID-19 as vendors consider pulling their properties from the market.” He notes that some lenders have also tightened their credit policies, particularly for off-the-plan properties. However, Yardley says, “Melbourne real estate has always been very resilient and held its own during downturns like the global financial crisis and other stock market collapses.” According to Herron Todd White’s Month in Review for April, the further cut to the interest rate may encourage more first home buyers into the market. However, how this pans out over the short term will largely rely on the unfolding behaviour of the virus.
All data sourced from CoreLogic, April 2020
11/05/2020 2:22:08 PM
IN THE HOT SEAT
A long career in mortgages and finance has seen Stephen Moore, CEO of Choice, face plenty of challenges and setbacks. While he sees ‘tough times ahead’ in 2020, he is confident the broker market will come out even stronger What advice would you give yourself if you were just starting out in the industry? “You know nothing, Jon Snow”… for the Game of Thrones fans amongst A us! When I first started in the industry, it took me a number of months to work out how little I knew. Since then I have never stopped learning. As the industry evolves, it’s crucial for all of us to continue to evolve to remain successful. Listening, learning and challenging are critical traits for the future.
How are you supporting your customers during the COVID-19 outbreak? Our support is currently focused across three key areas – the first A being, acting as a source of intel and interpretation to ensure members have access to the information and insights they need to deliver for their customers. Secondly, we are supporting members in embedding non face-to-face technology such as Zoom, digital ID and electronic signature solutions to ensure they can continue to deliver high-quality processes and customer service. Finally, and most importantly, it’s about personal support. It’s times like this that reinforce why we are keen supporters of RUOK.
What are your biggest career challenges and accomplishments? standout role was as a co-founder of UBank, which today A One is recognised as a leading direct bank. But without a doubt, leading Choice and being part of the broker industry continues to be the most satisfying. I still pinch myself regarding how lucky I am to work with such a great team and such fantastic brokers. I first started at Choice just after NCCP commenced, and I was brand new to our industry. At the time it was one of the biggest changes the broker industry had experienced, and I remember feeling like I was in the eye of the storm. But the industry came through, stronger than ever. As a collective, brokers are highly resilient, with a proven track record of not only surviving adversity but prospering beyond challenges.
What’s your biggest goal for the next year? For me, 2020 is all about supporting the Choice team A and our members in navigating the COVID-19 operating environment and ensuring they are well positioned to make it through this year strongly and successfully. While I know there are going to be some tough times ahead, I believe the broker proposition is stronger than ever.
11/05/2020 2:23:15 PM
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