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ISSUE 7.07 April 2010
Advantedge brokers to buy and sell at will
Steve Weston
New platform for
mortgage portfolios Advantedge has pledged to provide Choice, FAST and PLAN brokers a platform that would facilitate the buying and selling of mortgage portfolios by the end of the year. Clearly leveraging its experience with MLC, the
management team aims to have the buy/sell option to its brokers by the time full regulation comes into effect on 1 January. This would give those brokers deciding to leave the industry an easy way to sell their business. The buy/sell platform will be one of a number of features of Advantedge’s new Advantedge Financial Solutions service, which will also help brokers
increase the value of their businesses by expanding beyond mortgage products. “Ultimately, any broker or small business owner is looking to make money on the way through, and build an asset that is worth something at the end of that,” said Advantedge general manager of distribution Steve Weston. “What we’re now working on is a buy/sell service that will value your business and facilitate the buying and selling of broker portfolios.” Advantedge Financial Solutions GM Stephen Moore said that the service would be transparent and use an independent valuer to determine what a broker’s business was worth. The process would have an additional benefit, Moore said: revealing which elements added value to a broking business. That information could then be used to help Advantedge members get the most out of their businesses. Advantedge’s financial resources would allow it to purchase portfolios when there was a lack of liquidity in the market, but Moore stressed that it would not be used as an investment vehicle. Advantedge also hoped to be able to repackage portfolios so that Choice, FAST and PLAN brokers could build customer bases catering to their specific needs. Page 20 cont.
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Aussies reluctant to switch from banks According to a Datamonitor report, the high cost of exit fees for mortgage refinancing affects many Australians who think about switching lenders Page 16
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Houses overvalued The Australian housing market has been heating up again with undersupply creating overvalued prices. We look at some of the property market drivers Page 22
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Off the cuff Group sales manager for Liberty Financial, John Mohnacheff, talks to AB about the importance of treating customers as your business’s success tool Page 26
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Second-tier lenders face funding disadvantages
In a recent review of funding, Australia’s fifth-largest lender, ING DIRECT, has found that second-tier banks continue to face long-term structural disadvantages compared to the Big Four. With true competition being held back due to higher funding costs and lower margins on home lending for second-tier lenders, Mark Mullington, ING DIRECT’s chief financial officer, said that the lack of choice in the market was negatively affecting the broker proposition. “Part of the broker proposition is being able to offer choice and give the customer comfort that they’re going to look around for the best deal,” said Mullington. “Always coming up with one of the major banks will affect the broker proposition.” While Mullington conceded that being competitively priced
was an important factor in attracting brokers, he argued that second-tier banks such as ING DIRECT could offer brokers a higher level of customer service that is crucial in maintaining good client relationships. “In the mortgage broking world, word of mouth is critical to success. If we do a great job, then that customer will say great things, resulting in good referrals for the broker,” he said. However, despite a broad product offering and a strong commitment to the customer, the main issue impeding competition in banking was funding, Mullington noted. “For all banks the cost of funding has gone up substantially,” he said. “However, the rate it has gone up is very different for the major banks compared to everyone else. Even before the GFC there was a
cost-of-funding gap and now it’s bigger.” Despite obvious inequalities, Mullington said he was committed to bringing competition back to the market. “We want to make it possible for ING and other banks to provide competition so brokers have more choice of supply and customers get a better deal,” he said. Lobbying various groups, including the Australian government, ING DIRECT was tackling three main issues that affected access to funds for second-tier lenders. “One of the main issues lenders such as ING DIRECT face is a savings market that is simply too small,” said Mullington. “As a deposit taking institution our main source of funding is savings. Almost every form of investment is tax advantaged except for savings, which are taxed at the marginal savings rate,” he said. “It’s no surprise that Australians appear to be poor savers; if you put money into savings, you’re penalised.” Mullington also proposed changes to interest withholding taxes that disadvantage secondtier lenders who rely on offshore funds to import capital, and the introduction of covered bonds into the Australian marketplace. These changes would mean all banks could access funding at similar prices.
www.brokernews.com.au Publishing director.... Justin Kennedy Managing editor.....George Walmsley Editor............................... Luke Cornish Journalist.............................Tim Neary Production editors......Jennifer Cross ......................................... James Evans Design manager..... Jacqui Alexander Designer...................Jonathan Phillips HR manager.................. Julia Bookallil Marketing coordinator...Anna Keane Traffic manager............. Stacey Rudd Advertising sales Simon Kerslake t: 02 8437 4786 f: 02 9439 4599 simon.kerslake@keymedia.com.au Rajan Khatak t: 02 8437 4772 f: 02 9439 4599 rajan.khatak@keymedia.com.au Editorial enquiries Luke Cornish t: 02 8437 4773 f: 02 9439 4599 luke.cornish@keymedia.com.au Distribution Australian Broker is available by subscription. E-mail all subscriptions. and mailing enquiries to: subscriptions@keymedia.com.au t: 02 8437 4731 f: 02 8437 4753
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 can accept no responsibility for loss. © Key Media 2009 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. This magazine is printed on paper produced from 100% sustainable forestry, grown and managed specifically for the paper pulp industry
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ALI encourages broker diversification As brokers continue to face pressure to diversify in the face of declining commissions, Australian Life Insurance group (ALI) has announced an increase in investment as part of its strategy to help strengthen its distribution of mortgage protection to brokers. Providing ALI with a more hands-on approach at a time when brokers are embracing mortgage protection as a step towards providing a complete mortgage offering to their clients, ALI’s executive chairman, Huy Truong, has faith in the mortgage broking industry’s ability to weather the recent market storm. “The last 12 months have been a very difficult time for the
mortgage broker industry,” said Truong. “However, it is our view, as new owners of ALI, that while the industry is going through a difficult time, it will not go away.” Truong noted that out of approximately 12,000 mortgage brokers in Australia, ALI had exclusive distribution agreements with over a third, positioning it as a market leader in mortgage insurance. “When ALI first started, brokers were not that interested,” said Truong. “They were benefiting from terrific commissions and volumes, so they didn’t need to offer alternative products.” However, fast forward to 2010 and there is strong awareness about the need to embrace
diversification in a business model. “Diversification is important, but it’s not about diversification of strategy; it’s about diversification of income,” Truong said. “Our model is about saying to the broker that they don’t need to cross-sell other products. Our product is very much part of a core service that every broker should offer.” While banks have a stranglehold on the market, Truong suggested it was important for brokers to have an income stream from other products. However, he warned that brokers needed to think very carefully about how they would offer these products. “It’s not about becoming a life insurance salesman,” said Truong.
Commercial brokers face tough road ahead A recent inquiry from the Reserve Bank of Australia has revealed that lending to small business has suffered a slowdown, due to reduced demand and a general tightening in lending standards. The RBA’s findings also indicated that while small businesses in most industries had been able to access funding throughout the financial crisis, terms were less favourable for commercial borrowers, who now faced higher fees. Danny Masri, general manager of Mortgage One, agreed that commercial borrowers were facing a more difficult market. “Terms are definitely less favourable,” he said. With lower LVRs and stricter lending criteria restricting many small businesses from accessing funds, Masri said that
he did not expect things to improve until competition returned to the market. “I can’t see things really changing until the government guarantees stop,” he said. “By that time, banks will have a whole lot more market share.” Masri also noted that gouging was making borrowing much more expensive and less accessible for small businesses. “Rates have pretty much moved 200 points over the last 18 months due to the GFC. You can’t attribute all of that to a weighting of risk. A lot of it, 70–80 points, is pure gouging,” he said. Robert Stevens, director at Allied Capital, agreed with the RBA, saying that the combination of constrained credit terms, strict lending criteria and lower LVRs were eroding the opportunity for many clients to source funding.
Danny Masri
“Small businesses have to meet the bank’s lending criteria. If a bank changes its servicing policy from 1.5 times interest cover to 1.75 times interest cover, that changes the game for many small
“Brokers shouldn’t feel that they have to diversify away from being a mortgage broker. But they can become better mortgage brokers by offering mortgage protection to their clients.” As the only insurance company purposely built to service the broker market, ALI was committed to helping brokers entrench their business through the provision of quality services, Truong said. “The reality is that brokers are service-focused so they will always be able to compete with banks on that front,” he noted. “ALI has retrained thousands of brokers to approach their businesses slightly differently and it’s working for them.” businesses that may not have the available cash flow,” he said. For Carlo Abarte, national manager in commercial lending for Loan Market, demand has definitely declined. “With the GFC there has definitely been less demand across the board. The banks tightened up because of the financial crisis, and businesses have scaled back to get through the last 18 months.” he said. However, a lack of supply was also affecting the market, Abarte argued. “If you look at the property development market, only a handful of the majors are lending to development, but their guidelines have really tightened up,” he said. “Cash-flow lending is still challenging at the moment with banks in this climate preferring property-backed loans.” “We are at a low point,” agreed Masri. “Volumes may return slightly as the economy picks up, but it will be a gradual thing,” he said.
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News RBA official optimistic Brokers urged to register sooner rather than later in looking forward
In a speech to a Sydney audience on ‘The State of the Mortgage Market’, RBA assistant governor Guy Debelle said he saw reason for optimism looking forward. While it was undeniable that the major lenders were the big winners of the GFC, Debelle said that there was still competition in the Australian mortgage market as evidenced by the fact that home lending rates had not risen by as much as funding costs. “Moreover, the outlook for the smaller lenders has improved since mid-2009,” he said. “The securitisation market is starting to recover, with the volume of issuance to non-AOFM investors picking up and secondary market spreads decreasing.” Having a high-profile central bank official acknowledge the return of securitisation as a viable source of funding should come as a huge boost to non-bank lenders and the third party channel that is solely responsible for selling their loans. “Securitisation is once again becoming a more viable funding source for lenders, with spreads on newly issued RMBS – around 130 to 135 basis points over one-month bank bills for non-AOFM supported deals – a little below our estimated breakeven spread of around 160 basis points,” he said. While those margins make securitisation viable, it is still a
long way from the 17 basis points that lenders were paying to package up and sell their securities to investors. Most industry sources believe it’s unlikely that prices will ever drop that low but that a new ‘normal’ of 40 basis points may be a realistic hope once international markets settle down. Even Debelle acknowledged that the RBA’s estimate of the breakeven spread (and the profitability of the issue) fails to take into account different degrees of subordination across the RMBS issues. “To the extent that that the degree of subordination required by investors is greater than it was previously, the overall profitability of the issue will be lower,” he said. “This is because a greater share of the security is retained on the book of the issuer, or sold at a higher cost to another investor, reducing the return from the deal.” He said there were more signs that the cost of long-term and short-term wholesale funding was also decreasing since the middle of last year although he admitted the cost of attracting deposits remained high. “Consistent with this, the smaller lenders’ market shares have risen slightly over recent months, though they are unlikely to return to pre-crisis levels any time soon. The pre-crisis level of RMBS activity, which these institutions relied more heavily on, was supported by demand from offshore which is no longer there,” Debelle said. Reemergence of smaller lenders is a result of the major banks needing to increase their lending rates to recoup increased funding costs, at the same time that the funding costs for securitisation has fallen. Debelle also said that the RBA would take into account mortgage interest rates when deciding on monetary policy.
Brokers are now eligible to register for an Australian Credit Licence (ACL), which is a major requirement under the new National Consumer Credit Protection regime. Those looking to obtain an ACL must register with the Australian Securities and Investments Commission to comply with the obligations that accompany the new regulations. Even those looking to operate as credit representatives under their aggregator will need to register to be able to help homebuyers after 1 July. ASIC said that brokers should register by 18 June to make sure the registration is finalised in time, but Advantedge chief executive officer Drew Hall suggested that brokers register even earlier than that. “It’s not a big deal to register,” Hall said. “You should really register, by the end of May, no matter what your ultimate intentions are, so that there’s time to get that registration with all the lenders on the panel.” Hall said registering sooner rather than later would help allay the possibility of submitting a loan in July and being told that the lender could not do business with the broker because they were unable to track down the broker’s registration. ASIC commissioner Peter Boxall encouraged brokers to familiarise themselves with the new regime and register early to ensure compliance with the new obligations. “People who haven't registered with ASIC by 30 June 2010 must stop engaging in credit activities until they have a credit licence,” he said. “It is important that people take the time to understand the changes and make preparations to ensure a smooth transition.”
ASIC has developed a number of support tools to assist the broking industry in complying with their new obligations. “We have developed a range of guides to take people through registration and licensing step by step, as well as face-to-face support via our National Roadshow Program, now available as a webcast,” Boxall said. “We encourage people to use these and other resources as they start to assess and fulfil their new obligations.” Boxall said that ASIC had taken the time to review its previous programs and looked at how to improve those to make credit licensing more user-friendly and streamlined. “For example, we’ve halved the number of questions people had to answer for an Australian Financial Services Licence,” Boxall said. There are no fees for registration and the process is online and automatically pre-fills data where possible. It is also programmed not to repeat questions already asked of applicants who hold an AFS licence. Boxall said that APRAregulated applicants would also not be required to complete certain parts of the licence application. When brokers apply for registration, they need to show that they can meet certain requirements that will apply to them as credit licensees. Membership of an external dispute resolution body is required. Background checks will also be made so that certain statements about the past conduct of directors, company secretaries, partners or trustees involved in a business will be necessary. Updates to ASIC’s existing registers should also be made under the new system.
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News Westpac and CBA losing their grip
Westpac and CBA are losing their vice-like grip on the domestic mortgage manager, with ANZ becoming the fastest-growing home lender in February, having missed out on last year’s market share grab by its two rivals. In February, the banks lent an extra $8.5bn to homebuyers, with Westpac and St George accounting for 30% of this amount, or $2.6bn. CBA and Bankwest sold $2.2bn of home loans, while ANZ lent $1.54bn. NAB, which is also playing catch-up to Westpac and CBA, boosted its level of home lending to $1.3bn. Executive general manager for third party banking at CBA, Kathy Cummings, said the bank was happy with its share of the market and that ANZ and NAB had to be aggressive to win
customers, because they failed to take advantage of market conditions last year. According to APRA figures, Bendigo and Adelaide Bank was the big winner out of the secondtier lenders, increasing its home lending by $320m. Other secondtier lenders suffered in February, with AMP’s mortgage lending contracting for the month. Westpac and CBA still dominate the market with 56% of market growth during the month, but their lead has slipped from the 70% share they had in 2009. NAB would have had better ratings in February had technical problems in late January not prevented brokers from having some of their loans processed. ANZ also suffered from processing delays.
MFAA to launch milliondollar ad campaign MFAA CEO Phil Naylor said the industry association was in the early days of planning a milliondollar campaign to increase awareness among consumers of the benefits of dealing with an MFAA-accredited broker. The move comes as regulation looks to level the playing field and industry bodies such as the MFAA need to maintain their relevance to members. “ASIC will certainly be promoting the fact that regulation is coming in. Our challenge and what we’re going to do as part of our strategic review is to promote MFAA membership to be operating at a higher standard than regulations,” Naylor said. He said that associations always faced the challenge of maintaining their relevance and the impending regulation could provide an opportunity. Naylor said the internal review showed that members wanted consumers to know that they operated at a higher level than the bare minimum required of them in the new regulations. “We’re looking at an advertising campaign now that will come out later this year and there’ll be ongoing campaigns that reinforce that fact to consumers,” Naylor
said. “Our objective is to establish in the consumer’s mind that someone who is an MFAA member is operating at a higher standard than is required under regulation.” Naylor said that holding a licence was one thing but it did not give brokers any competitive advantage because everyone else had one. “The relevance of regulation is that it gives us a standard now with which to compare ourselves,” he said. The MFAA board has committed to spending around 10% of its annual revenue on promotion. While this would change from year to year, Naylor said it meant an advertising budget of around $1m.
Phil Naylor
Smartline appoints Billings as new GM Smartline Personal Mortgage Advisers has appointed Jayson Billings as general manager, following three years with the group as national operations manager. Smartline managing director Chris Acret said the creation of the new role and the appointment of Billings reflected the group’s focus on proactively driving growth in the next few years. “Billings has been an integral member of our management team since joining
Smartline in early 2007,” Acret said. “He has played an active role in a number of key initiatives, including the management of our merger with Mortgage Force and in rolling out our continually evolving service and support offering to our franchisees.” Smartline was founded in 1999 and has since grown to encompass 200 franchises. In 2009 the group was awarded Franchise Operation of the Year at the Australian Mortgage Awards in Sydney.
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BIS: 7.5% tipping point for customers
BIS Shrapnel has warned the Reserve Bank not to raise rates too aggressively, saying further tightening could undermine Australia’s fragile economic recovery. “The private sector recovery is now well underway, but with interest rates back at 4%, there is no longer the imperative for the RBA to continue front-loading interest rate rises,” the company said in a report.
“With comparatively weak income growth and high levels of debt, the household sector is sensitive to rising interest rates,” BIS said. “A housing variable rate of 7–7.5% has historically been a tipping point for consumers.” The report said the RBA would not want to undermine consumer spending and employment growth, nor would it want to undermine the nascent housing recovery. BIS Schrapnel noted
that housing secured credit strengthened over the second half of 2009, underpinned by the boost to the First Home Owner Grant. “As expected, first homeowner demand fell back once the boost was phased out,” the report stated. “However, the January housing finance figures also showed upgrader demand lost ground for both established dwellings and the construction of new dwellings.”
Central bankers in Australia were facing a dilemma, the report said: they were keen to head off a potentially damaging housing asset bubble but eager to avoid undermining the recovery in dwelling construction. “The shortage of stock has meant that this has quickly translated into higher house prices,” the report said. “There was a risk that homebuyers would over-extend themselves at unsustainably low interest rates, creating a potential sub-prime crisis when interest rates inevitably rose from their emergency low levels.” BIS Shrapnel emphasised that a major round of housing construction was needed to keep homes affordable, but that a lack of land available for development and high development costs had been major factors driving up house prices. “The RBA cannot influence these supply-side issues, but it is the supply imbalance which is driving up prices,” the report said.
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Weston wants to grow brokers’ share of the pie Advantedge GM of distribution Steve Weston said brokers must increase the proportion of home loans that come through the third party channel in order to survive increased costs and reduced commissions. In the past two years, average commissions have fallen from 0.7% upfront with 0.25% trailing to around 0.55% upfront and 0.15% trailing. Weston said he had looked at what that meant for an average broker who had been in business five years. “After five years, when the business is matured, under the old regime you would have been earning a gross income of $100,000 – not driving Lamborghinis like Brian Johnston would think,” Weston said. “In five years time, if commissions don’t change, the average broker will be making $70,000 pre-expenses.” Those expenses are going to rise for brokers, aggregators and lenders under the new regulations and Weston said that most people in the industry would not be able to take the hit. “There is not another industry in the country that is going to take a pay cut of 30% in the next five years,” he said. “We are – unless we do something differently.” Weston contended that brokers needed to offer products other than mortgages to provide a more
Steve Weston
complete service to the client. Brokers who diversified and sold insurance were able to expand their revenue base and set up their business for sustainability, he said. “Just getting a reasonable penetration of insurance sales will help that out but it won’t be enough to close the gap entirely,” Weston said. “What we need to do, for the sake of the industry, is get our 40% to a higher figure.” Weston said that, by going above and beyond what was necessary under the new regulations, brokers could use this opportunity to springboard the broking sector into a whole new era of credibility, in the eyes of consumers. “If we can get that recipe right, we are setting the
industry up for success,” he said. Prior to the GFC, brokers in the UK had just less than 70% of the mortgage market. Weston said that Australian mortgage brokers ought to be able to achieve a similar penetration. “The broker should win comfortably every time,” he said. “A broker will come to see you, a broker will work with you for your next loan so you don’t need to talk to someone else, a broker will help you step-by-step through a complex process – banks are always going to struggle to replicate that.” Advantedge CEO Drew Hall said that the 40% margin could come under threat from reverse auction websites unless brokers took up the challenge to offer customers even more. Using a reverse auction website, a borrower can put in an amount they want to borrow, what the LVR is and other criteria, and then lenders ‘bid’ on the loan by presenting their interest rate and fees. “If our only role is to show a selection of products and the client selects the cheapest one and there’s no advice around suitability then the industry is going to be limited in its potential for the future,” Hall said. “I think regulation is the catalyst to launch the industry to add value in consumers’ eyes.”
Record refinancing boosts second-tier lenders Mortgage refinancing hit a record high of 37.2% of all mortgages arranged in March, with increasing numbers of property owners turning away from the major bank groups to arrange new finance with second-tier lenders, according to AFG. The latest AFG Mortgage Index showed that the level of refinancing had risen steadily in recent months. The data also
showed lending by the Big Four banks and their subsidiaries reduced to 82% during March. Non-majors accounted for 18% of new loans, an increase of 100% on the 9% market share of the non-major lenders in March 2009. It confirmed the trend identified in ABS data released in February showing that bank lending drew back to 88.1% of all loans in the fourth quarter of 2009.
“Borrowers are making the psychological transition to a post-GFC world,” AFG GM of sales and operations Mark Hewitt said. “They are once again regarding other lenders as providing reliable and attractive alternatives to the majors.” The Mortgage Index again confirmed the sustained rise of property investors, who accounted for 35.1% of mortgages arranged
CUA cuts home loan rate In a move it said would promote competition in the banking sector, CUA has pledged to cut its standard variable home loan rate (SVR) by 0.25%. This would take CUA’s SVR, on average, to more than half a percentage point lower than variable rates offered by the majors. CEO Chris Whitehead said Australia’s largest mutual made the decision after treasury secretary Ken Henry said that competition in the Australian banking sector had diminished. “We agree … that the banking sector has become more concentrated over the last few years,” he said. The move effectively means that rates will stay the same for CUA borrowers after the Reserve Bank lifted rates once again in early April. A comparative analysis of SVRs by InfoChoice revealed that CUA customers would pay, on average, $1,247 per year less on their mortgage, compared with the average customer of the banks. “CUA’s announcement … puts them 0.51% lower than the average of the Big Four banks. InfoChoice supports this move and sees CUA taking a prominent role in improving competition for financial services,” said CEO Shaun Cornelius. in March. On the other front, first-time homebuyers continued to decline as a proportion of the overall market to 10.4% of market share – compared to 28.1% in March 2009. Fixed loans continued to be unpopular with borrowers, with only 2.5% of buyers opting to fix their mortgage in March, compared to the 78.2% who chose variable loan products. Fixed rate products already have several rate rises priced into them.
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INDUSTRY NEWS IN BRIEF Mortgagee repossessions fall in NSW
Improved economic conditions and double-digit rises in house prices have contributed to a fall in mortgagee applications for repossession across NSW. Foreclosures have fallen from 0.25% of all homes to just 0.1% as at the end of 2009. This means that NSW now has a foreclosure rate almost equivalent to that of Victoria, South East Queensland and Western Australia. NSW’s foreclosure rate spent about three years hovering at least 30% higher than other states. According to the RBA, part of the reason for the fall in repossessions was the reduced market share of non-bank lenders, which, it claimed, were quicker to move to foreclosure than the major banks. Housing Industry Association chief economist Ben Phillips warned NSW homeowners that foreclosure rates could rise again this year. “The issue will be what happens in 2010 and 2011 when interest rates are higher,” he said.
Westpac a serial offender: Swan
Federal treasurer Wayne Swan has again slammed Westpac, claiming the bank has become a “serial offender” in “taking its customers for a ride”. Referring to Westpac’s latest decision on credit card interest rates and its supersized home loan rate hike in December, Swan said this was “exactly why people don’t like the big banks”. At 7.26%, Westpac’s variable home loan rate is the highest of all the major lenders. By contrast, Credit Union Australia has cut its variable rate by 25 basis points, opening up a yawning gulf between it and the big banks. CUA’s standard variable rate is now 0.64% lower than Westpac’s. A professor of finance at the University of NSW, Fariborz Moshirian, said that there was in fact no justification for extra rate rises by the banks, as international credit markets had settled in recent months.
National Mortgage Company launches 95% LVR
National Mortgage Company has launched two new products aimed at assisting brokers expand their target markets. NMC is aiming to support introducers who access quality clients that wish to purchase property but have minimal deposit funds. “Our introducers have access to a large number of quality borrowers who simply need support around the amount of deposit required,” said Grant Lloyd, head of wholesale mortgages. “With a number of large lenders reducing their offering in this space, we see an opportunity to assist introducers in servicing quality borrowers via these products. The 95% LVR is available to owner-occupiers and investors.” Lloyd said the owner-occupied option comes with the benefit that no genuine savings are required – deposit funds can be gifted and/or borrowed. “Of course there are a few tighter controls around borrower quality but this will off-set the risk factors around the LVR,” he said. “We are taking a step in the right direction for our introducers and their clients.”
nMB sees strong support for new product
In the first few weeks of launching nMB Direct, National Mortgage Brokers has received $5m of submissions for the product group. Funded by The Rock Building Society, nMB Direct consists of three products that lending services manager Jodie Hainey said were developed to meet specific needs within the market. “We are really excited about this initiative and the positive response we have received from our brokers,” managing director Gerald Foley said. The produces include an SVR loan, a packaged loan and a fixed rate loan. nMB is one of a number of broker groups turning to badged products to take control over the service delivered to their clients. Mortgage Choice is also talking to potential funders to create their own line of products. nMB Direct SVR loan allows borrowers up to 95% LVR and no genuine savings, while the packaged loan is available for LVRs up to 90% and comes with a 0.85% discount off the SVR rate. The fixed loan also allows homebuyers to borrow up to 95% LVR.
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Bright future for Mortgage House Non-bank lender Mortgage House has recently launched an innovative new home loan product with a standard variable rate of 5.99%. More than a full percentage point cheaper than the standard variable rate currently being offered by any of the Big Four banks, the Vantage Offset Home Loan Package is just part of Mortgage House’s commitment to bring competition back to the marketplace. Managing director Ken Sayer, who has been in the mortgage finance business for more than 30 years, is excited about a return of competition to the market. “Mortgage House is proud to be bringing true competition back to the home lending market,” he said. “The Vantage Offset Package offers customers a real choice, with a real balance between features and pricing.” After a tough couple of years, Sayer believes that the relevance of non-bank lenders is becoming more important for consumers and brokers alike. “It’s now our time. Banks are reducing their LVR’s and low-doc appetite,” he said. “Non-bank lenders are still providing premium products in the prime space at a more competitive price, and continue to provide funding for higher LVR’s and low doc products.” This, said Sayer, will provide brokers with competition crucial to a strong lending market. Sayer argued that while banks
currently hold a monopoly, as non-bank lenders gain traction they’ll lose some of their dominance. “I don’t know if banks can stop the imminent slide in market share,” he said. “When you’re at the top, there’s only one direction to go.” Confident that frustrated brokers are keen to move away from banks that have implemented strict volume controls and slashed commissions, Sayer believes that these “onerous conditions” are turning brokers back to non-bank lenders. “Non-bank funders can now deliver equal products at a competitive price,” he said. But competition isn’t the only benefit non-bank lenders can offer the broker channel. “A non-bank lender and a broker’s state of mind are lined up. In our world it is about being there every day, with a consistent message,” said Sayer. Whereas publicly-listed ADI’s are more interested in return on investments and dividends, Sayer noted that non-bank lenders are more concerned with building ongoing relationships with both brokers and their clients. “We’re on the same side with common goals and interests. If it wasn’t for the GFC, non-bank lenders would own this space now,” he said. For Mortgage House, the future looks bright. “I’m very excited about our prospects over the next three years,” said Sayer. “The happy days are returning”.
MFAA trademark application rejected MFAA’s dream of having its members exclusively labeled Professional Credit Advisers has been dealt a blow, after the federal government rejected its trademark application on the basis that the terminology was too generic. Documents obtained under the Freedom of Information Act show that the trademark examiner rejected the application because it would limit non-MFAA members working in the broking industry. “Your trademark consists of the words ‘Professional Credit Adviser’,” said the letter to the MFAA. “This is apt for description of a person engaged in the provision of services you have claimed in your application. Other traders should be able to use ‘Professional Credit Adviser’ in connection with services similar to yours.” FBAA president Peter White had the same problem with the trademark application and said the whole purpose of licensing
was to make everyone in the industry professional credit advisers. “We’re somewhat against them having a trademark against that name because it’s more of a generic industry term that will apply to all people who hold an ACL going forward,” White said. “We’re not against using the terminology but in having it trademarked to an industry association, where it is really a term that should apply to anyone because that’s the whole purpose of bringing in licensing.” MFAA CEO Phil Naylor acknowledged that the application had been rejected in its current form but insisted the industry body was still pursuing it. “We’ve got copyright lawyers that are handling it but it’s gone back with a slightly different presentation but we’re still pursuing it,” Naylor said. “Whether it’s the exact wording, I’m not sure if that’s been decided.”
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Broker groups consolidate in December quarter Brokers experienced one of the heaviest quarters of consolidation in the three months to December, according to a report by the Market Intelligence Strategy Centre (MISC). The number of active mortgage broking groups in the quarter fell by 7% to 190, with MISC saying a number of factors had impacted on the dwindling power base of smaller brokers. “Not the least of which is the new requirements of ASIC for all brokers to obtain certification and the tighter accreditation standards of the MFAA,” MISC said. “Both these moves have discouraged many smaller broker firms from even competing.” At the same time, the larger aggregator groups had continued with their acquisition phase, MISC said. The entire mortgage broker market suffered badly in the December quarter with a 13% contraction in loan volumes, recording just $16.3bn for the three months. This happened despite a 5.4% lift in average mortgage sizes on the back of
housing price increases in some states, the dwindling influence of the First Home Owner Grant on mortgage sizes and early evidence of increased investor activity. Results were further impacted by tighter credit restrictions imposed by the lenders, the final removal of the FHOG boost, and the ramping up of interest rate rises by the RBA. “For the lenders the quarter marks something of a milestone, as the Big Four banks have lost share to regional banks,” MISC said. “Regional banks grew their market share to 24% from 20.6% in the previous quarter, while the Big Four banks saw their share fall to 69.8% from 72.2%.” The increase in the regional banks’ share of the mortgage market is the third consecutive gain over the last year. There were also signs of smaller nonbank lenders re-emerging into the channel as some larger lenders provided seed funding for new lenders, and niche players developed specific, broker-only, offerings.
Broker mortgage business growth December quarter 2009 quarterly comparisons Selected indicators of channel performance Broker activity
December quarter 2009
December quarter / September quarter 2009 % change
No. of active broker groups*
190
-7%
Top 5 broker/aggregator groups’ share of business
59.3%
+3.2%
Top 10 broker/aggregator groups
83.4%
+5.5%
Industry performance
December quarter 2009
December quarter / September quarter 2009 % change
Broker industry new business, ie contract volume
56,407
-13%
Lender performance
December quarter 2009
December quarter / September quarter 2009 % change
Big Four banks (excluding BankWest, St George, Bank SA, RAMS)
69.8% share
-2.4%
All regional banks (including BankWest, St George & BSA)
24.1% share
+3.5%
*1 Active broker is a broker group writing at least three loans each quarter, ie one per month 2 Note: MISC Pool measures include: all home mortgage contracts (not approvals and not commitments). Pool measures exclude top-ups, commercial lending secured by domestic housing, undrawn lines of credit, undrawn construction lending, other thirdparty non-commission lending. The MISC Pool does not measure what is known as internal refinance or loans written by the same banks for the same customer seeking to change his or her loan. Source: MISC (Market Intelligence Strategy Centre)
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News
Australians reluctant to switch banks Mortgage exit fees and the effort involved in changing a transaction account means that Australians are loyal to their banks for the sake of convenience, rather than any fondness for the brand, a new report has found. “Barriers to exit in financial services currently have a higher impact on customer retention than factors such as satisfaction,” said Petter Ingemarsson, senior analyst at Datamonitor and author of the report. “For transaction accounts, the effort involved acts as a deterrent to switching, while for mortgages, exit fees serve to lock customers in.” In the mortgage space, exit fees are commonly applicable for customers refinancing within five years. These fees remain a source of controversy and the subject of scrutiny by regulators. “As the prevalence and level of early termination fees has grown, some do not
appear to be related to the underlying costs they are purporting to recover,” a 2008 review by ASIC noted. Consumer advocates have argued that exit fees allowed lenders to raise rates with impunity as the customer may not be able to afford switching. While the government has pledged to put downward pressure on such fees, the banking industry argues that exit fees are necessary to recoup costs associated with a switching mortgage customer. According to Ingemarsson, the government is in the process of introducing legislation to limit exit fees. “There is a balance that must be struck when approaching such regulation,” he said. “On one hand, consumer protection from unfair or deceptive practices should be guaranteed, but on the other hand, overregulation can lower the efficiency of Australia’s well-functioning financial system.” Ingemarsson advised brokers to talk to their clients about the importance of examining the fine print of loan contracts very closely. Each borrower should then be able to make an informed decision and choose to trade off between product features in a way that suited their particular circumstances.
REIA slams lack of competition in finance market David Airey, president of the Real Estate Institute of Australia (REIA) met with federal housing minister Tanya Plibersek to talk about emerging issues facing the real estate profession, including the lack of competition in the mortgage market. Airey told Plibersek that the dearth of competition in mortgage lending allowed the majors to change policies – making it hard for everyone
working in the industry, from builders to brokers. “This has severely depleted competition and funding for smaller banks such as Bendigo Adelaide and Bank of Queensland, as well as other non-bank lenders, who suffer a huge disadvantage with funding costs,” he said. Airey said major banks were “continually moving the goalposts”, with long delays in
loan approvals, tightening of credit, lowered LVRs and changed credit assessment criteria, which resulted in delays and some loans suddenly being on the wrong side of the new criteria. “REIA is also extremely concerned about access to finance for small business and will be making a submission to the Senate inquiry on this specific issue,” Airey said.
“REIA has been overwhelmed by the response to a survey of members seeking information about the lack of access and the cost of finance to run real estate businesses.” Plibersek invited REIA to forward to her specific information relating to access to finance for small business, and also restricted and changed lending practices in the mortgage market.
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News
For all the latest mortgage industry news, visit www.brokernews.com.au
Financial services employers confident Financial services employer sentiment has surged again to reach its highest level since March 2008. According to the latest Hudson Report: Employment Expectations survey, Australian financial services employer confidence has grown a further 4.1 percentage points, with a net 37.2% of employers reporting plans to increase their permanent staff levels during the April–June 2010 period. This marks the third consecutive quarter of rising confidence, according to Hudson. “Confidence in the financial services industry is continuing to improve, as sentiment in financial markets picks up and credit market conditions begin to look more positive,” said Dean Davidson, national practice director at Hudson.
In New South Wales, financial services employers have built on the strong level of sentiment reached last quarter, with a further increase of 3.9 percentage points. Now recording one of the highest levels of confidence across all industries in NSW, a net 37.8% of financial services employers are intending to increase their permanent staff levels over the coming three months. “With the financial services market becoming more consolidated and the existing players battling for market share, organisations are increasing their capital expenditure on transformational change programs, risk infrastructure and distribution channels,” said Davidson. “This has created increased demand for staff in these areas.”
Second-tiers get their say Amidst all the talk of smaller lenders not being a viable alternative because they lack competitiveness, Simply Mentoring facilitated a ‘Lender4 Brokers’ day, where smaller lenders were able to talk with more than 100 brokers. The Perth initiative followed the format of a panel interview with five second-tier lenders, with Karen Hambleton-O’Grady as the session facilitator. During the two-hour session, the panel, which comprised Adelaide Bank, AMP, Citibank, Police & Nurses Mutual Credit and Liberty Financial, was asked to sell their proposition to the audience. “Brokers peppered the panel with some hard-hitting questions about service levels, which has been a bugbear for brokers with the majority of lenders,” Hambleton-O’Grady said. The panel assured the brokers that their bread-and-butter source of income was from the broker channel and that they were focussed on service, conversion and sustaining the good relationships that they had already formed, she said. Hambleton-O’Grady said that brokers were most interested to hear about niche products, such as one lender’s 95% LVR with non-genuine savings.
Real estate sales figures soar
Two of Australia’s top real estate agents have announced surging sales figures, even as the RBA pushed interest rates up for the fifth time in seven months. Ray White and McGrath Estate Agents both had their strongest month since the beginning of the GFC. McGrath made 572 sales in March 2010, totaling $635m. This was up from 401 sales at $385m in March 2009. “Today’s property market is one of the hottest I’ve seen in many years,” said CEO John McGrath. “The correction is well and truly over and prices have recovered, if not exceeded, their 2007 high.” Ray White’s total sales jumped to $2.8bn for the year to March, a 16% increase. The group’s joint chairman, Brian White, said demand was being driven “by an increased feeling in the community that buyers may have missed the bottom of the market”. The Australian housing market managed to avoid the fate of its counterparts in the UK and US and has maintained its momentum throughout the global downturn. This can be attributed in part to the federal government’s intervention in the
form of the boost to the First Home Owner Grant. However, key industry figures are concerned that the only thing the federal grant accomplished was to bring forward homebuyers, who would have bought in 2010 anyway. This is already becoming evident as the proportion of loans brokers write for refinances rises to all-time highs, first-time buyers exit the market and investors pour back in. The next 12 months will prove important to brokers and real estate agents alike. If predictions of a credit shortage turn out to be true, the number of borrowers able to qualify for loans will begin to shrink. This will have a significant impact on property values around the country. The flip side is that borrowers are more likely to turn to brokers, who are able to sift through the vast numbers of different loan types available and select one that will enable the homebuyer to realise their dream of becoming a homeowner. Either way, until the housing supply shortage is addressed, real estate agents and brokers can expect profits to continue to climb.
Decision time Karen Hambleton-O’Grady
Liberty Financial worked the room well with its message that it was definitely not a ‘lender of last resort’. Despite its high LVRs and package range that often appealed to non-conventional customers, it was eager to be seen as ‘just another lender’. AMP emphasised its master limit product, which gives the customer a pre-approved limit for 10 years. There will be another panel session in Perth this month with the same lenders, due to the number of interested brokers exceeding the capacity for the first session. Simply Mentoring is a mortgage broker information service, tailoring answers to specific questions from brokers. A oneyear subscription to the service costs $699.
Now that the operative provisions of the National Consumer Credit Act 2009 have commenced, it is necessary for mortgage/finance brokers to make decisions as to the future direction of their business. The main consideration is whether you propose to become a credit representative of one of the larger aggregators or if you propose to conduct your business as a credit licensee. If you propose to become a representative, then your credit licensee will be responsible for providing the advice required for you to continue to operate as a mortgage/finance broker. The credit licensee will request certain information including details of your membership of an external dispute resolution scheme and whether you have professional indemnity insurance cover. To be able to operate after 1 July 2010 it will be necessary for the credit licensee to have appointed you in writing as a
credit representative. The credit licensee is required to notify ASIC of your appointment from 1 July 2010. An issue for you to consider here is whether the credit licensee will restrict the number of lenders for whom you will continue to be accredited. Should you wish to apply for your own credit licence then it will be necessary to register your intent with ASIC during the period from 1 April 2010 to 30 June 2010. There are a considerable number of documents, agreements and processes that must be in place at the time of applying for a credit licence and it is advisable to engage an external consultant. The ASIC credit website also contains a substantial amount of information to help you understand the requirements. Gary Ling is a consultant at the law firm Kemp Strang. He can be contacted on: lingg@kempstrang. com.au
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slams shut Life in the fast lane Window on fixed loans
Todd O’Brien, director, Financial Destiny, at the track with the company V8 race car and 18-year-old cancer survivor Chris Rabin from CANTEEN
If you’re in Adelaide in early March, there is probably just one thing on your mind – the Clipsal 500 V8 Supercar races. This year, mortgage broker Todd O’Brien used the event to give 19 sick children a day to remember. “The aim of the day was to provide ill and disadvantaged kids the opportunity of a lifetime and fulfil their ‘need for speed’,” O’Brien said. “The day provided the kids, and their carers, with a break from their everyday routine and the chance to experience something out of the ordinary and put a smile on their faces.”
O’Brien invited the youngsters aged 15 and older from the charities CANTEEN, Autism SA and Time For Kids to take part in the event. Each was treated to four ‘hot laps’ of the full race circuit in the Financial Destiny V8 Racing Ute. Driven by O’Brien, the vehicle reached speeds of up to 200km/h. “All in all it was an amazing day and very rewarding to see for myself first-hand the difference we have made to these kids’ lives,” he said, adding that it would not have been possible without the support of sponsors, including BankSA, ING Direct and FAST.
Fixed home loans are well and truly out and flexible variable mortgages are in, according to financial comparison website RateCity. New research found that the number of fixed home loan applications on its website dropped by 70% from its peak in June 2009, when 41% of home loan applications were for fixed loans. In March 2010 the figure was just 13%. “There was a very brief window in the middle of 2009 when fixing a home loan looked attractive,” CEO Damian Smith said. “As rates have risen, with fixed rates typically 2% above a variable rate, most homeowners are now better off with a variable rate loan, and we’ve seen the appetite for fixed loans slow accordingly.” Over the calendar year of 2009, the average proportion of fixed home loan applications on the site was 26% each month. For the first three months of 2010, the average number of fixed home loan applications dropped to 11% of the total number of applications. Smith said he was not surprised by the fall in demand for fixed home loans. “Since June 2009, we have noticed fixed rate home loan applications begin to drop, and a rise in popularity for variable loans, because that’s when variable rates were at their lowest, with the average standard variable rate of 5.9% in June, for instance,” he said. “The lowered cash rate and variable home loan rates have dramatically impacted on the fixed home loan market as fixed rates rely on the money market rates, which have increased on average over the whole of 2009.”
Key points Fixed loans drop by 70% since June 2009 More Australians choosing flexible options Lenders reducing margins on fixed loans to attract business The money market rates, or Bank Bill Swap Rate (BBSW), are fixed rates that lenders use to borrow between each other. Fixed home loan rates generally follow money market rates rather than the Reserve Bank cash rate, which is the benchmark for lenders’ variable rates. Smith said that as a result of increasing money market rates, lenders had found it harder to compete for market share in fixed home loans. “On average, fixed home loan interest rates have continued to rise since last year – however, the gap between fixed rates and money market rates has been reducing since December, from 3.78% to 3.66% in March,” Smith said. “In August last year, one-year fixed rates averaged 1.89% above the money market rate. In March this gap has dropped by 60 basis points – the biggest drop we’ve seen over the past year.” Smith said that even though fixed rates had increased on average, his website had seen some lenders dropping their fixed rate loans in the past month, such as Iden Money who dropped their rate by as much as 65 basis points. Holiday Coast Credit Union has also dropped its fixed rates by up to 50 basis points. “This means that lenders are reducing the amount of profit they make on fixed home loans to try and win back customers,” Smith said.
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Letters consequences of deregulating various parts of a finance broker’s activities, especially the private mortgage market. Regards, Ray Weir *Editor’s note: this letter was originally sent to the WA government
Dear editor,
Dear editor,
It’s interesting to note that following the introduction of ASIC’s regulation of credit on 01/07/10, many forms of credit that finance brokers currently arrange will become unregulated. I’m referring to credit provided to companies and family trusts regardless of whether it is secured by residential or other property, plus loans secured by other forms of property such as commercial, retail, rural, deferred urban, mixed development etc. This means a large slice of credit previously regulated by Western Australian law will no longer be regulated, at least until Phase Two of the National Credit Reforms is legislated by the commonwealth in a year or two. Therefore, in the interim, the only regulation applicable to more than half my finance broking transactions will be state and federal fair trading laws, for which no licence or PI insurance is required. This will also apply to the “one-on-one” private mortgage market where only nonregulated loans are normally arranged. That market will then be open to any person. I trust our state politicians are aware of the possible cont. from cover
>>
“From time to time there will be the need for us to buy a portfolio and hold onto it until someone comes along to buy it, but we’ll be very transparent about the way that was valued and it wouldn’t be a matter of holding it and selling it for twice as much,” Moore said. “Say a Sydney broker who is
When, oh when, will someone expose the most damaging and outrageous lack of competition in the broker industry? For comparison, first consider that a financial planner operates typically as an Authorised Representative of an Australian Financial Services Licence (AFSL) holder (known as a dealer group). It is important to recognise that the adviser does not hold a licence, but operates under the dealer group licence with their authority. If such an adviser becomes dissatisfied with the service offering from that dealer group they can affect a ‘bulk transfer’ of their business to an alternate dealer group. What this means is that all the product providers (life offices and fund managers) transfer the existing client portfolio inclusive of ongoing commissions and fees from the original dealer group to the alternate dealer group. With broker licensing about to start and be regulated by ASIC the similarity is apparent. Brokers operate as a sub-introducer (subcontractor) of larger broker organisiations (head introducers known as aggregators). A few well-established brokers may still deal direct with some lenders, but this is no longer possible for new entrants. If a broker becomes dissatisfied with the service offering from an aggregator they can resign and enter into an alternate contract with another aggregator, but they cannot transfer their existing commission. They must rely on the goodwill of the original aggregator to keep paying them, even though no new business is being generated. While most aggregators claim they will continue to pay, as absolute holder of the income stream, they can increase their share (retention) or charge fees for managing that commission. Any protest by a broker exposes them to the risk of suspension of payment or forfeit. There is a seething mass of unhappy brokers suffering in fear at the mercy of the larger and more aggressive aggregators. There is no real competition between aggregators as no well-established broker can risk forfeiture of their trailer income. It is clear that aggregators are not going to carry the risk of being a licensee granting authority to brokers, but will require brokers
looking to sell has a whole load of clients in Dubbo. Another Sydney broker might not be interested in the Dubbo clients, but a Dubbo broker may be – so we can re-parcel the portfolio and everyone will benefit.” Moore said this kind of platform is well entrenched in the world of financial planning but that there was not a
to be licensed in their own right. This means the broker will be individually responsible for their conduct and advice to consumers. If this is to be the industry model both ASIC and ACCC should insist upon "bulk transferability" being introduced. How can a broker be the entity responsible to the consumer yet not be the owner of the remuneration payable by the lender for their services? Patrick McMenamin
Dear editor,
Given the circumstances where many lenders seem to take the same action at the same time (eg reducing LVR positions, reducing commissions and changing policies along the same lines) one could be forgiven for thinking that there may have been group discussions between lenders prior to implementation. One ‘happening’ may be a coincidence but two of the same creates a pattern ... or am I being paranoid? Rumours exist in the market (and are repeated by some lending staff) that a major lender is endeavouring to reduce its reliance on broker volume to 20% of overall business written. If that is true then that is a major reversal of strategy compared to the past. The matter of minimum volumes is and will continue to be a stumbling block for brokers. Lenders seem to think that it is because brokers don't know the lender products and processes, but in reality the major reason that lenders may not receive any volume for six months or so is that they don't have the best (most suitable product) for the client at the time. Under the upcoming regulations brokers may well be pressured to breach the regulations merely to retain accreditation with a lender. Hardly a desirable situation and in the future an illegal one. One point of view about ‘most suitable product for client’ is that if a lender has only one suite of products, how can it define the ‘most suitable’ position for the client? The regulations don't call for the lending product to be a suitable one within a small product range provided by a lender. Graeme Kluck
They must rely on the goodwill of the aggregator to keep paying them, even though no new business is generated
significant service available for mortgage brokers. “We see it as part of our responsibilities to help create that market,” he said. While brokers can often arrange the sale of their own businesses, the new system – which is still in its planning stages – will enable them to avoid the high legal
costs involved in a bespoke transaction. Advantedge Financial Solutions is also looking to help brokers expand beyond mortgage products and provide both brokers and mortgage managers with a non-lending product panel of preferred providers that would enable them to provide a more complete customer service.
“I was nominated as a finalist for the Best Aggregator BDM category by a couple of my members. Little did I know, that I would not only win the title of Best Aggregator BDM, but would also attain the title of Australian BDM of the Year, as well. I would highly recommend to anyone who is nominated to complete the process and apply. Winning these awards has opened doors that would otherwise have remained shut.�
SAM ZAMMIT
WINNER: BEST AGGREGATOR BDM, AUSTRALIAN BDM OF THE YEAR AMA09
September 24, 2010 The Westin Hotel, Sydney
Online nominations open April 1, 2010 www.australianmortgageawards.com.au Official event partner
Award sponsors
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Feature
Dr Shane Oliver is head of investment strategy and chief economist at AMP Capital Investors
Australian house prices – overvalued but undersupplied The
T
he outlook for house prices is very important for Australians and our economy. Housing is the biggest investment most families undertake and poor affordability has significant social consequences – the unwinding of high house prices in the US shows the economic damage it can cause.
Australian housing market has been heating up again but can it continue? Australian house prices rising again AMP Capital Australian house prices rose 13.6% last year and their Investors chief economist Shane strength seems to have continued. House prices in Australia have performed far better than those in the Oliver looks at UK and US over the last few years, thanks in large part the drivers of to the stronger performance of the Australian economy. Australia’s Prices are even stronger than China where house prices booming are up 10.7% over the last year. So where to from here? On most measures Australian housing is very property market
expensive: house prices are well above their long term trend. Over the last 80 years the trend rate of growth in real house prices has been 3% pa, consistent with long term real GDP growth. But since the mid-1990s house prices have risen well above trend – and remain there. It’s possible to rationalise the strength in house prices over the last 15 years on the grounds that house priceto-income ratios have been pushed up by the growth of two-income families, lower interest rates on the back of the shift to low inflation, and financial deregulation, all of which have increased the amount of money people can borrow – and hence pay –for a house. However, while this may be true it fails to explain why Australian house prices are so high on international comparisons, given these considerations also apply in other countries. According to the 2010 Demographia International Housing Affordability Survey, Australian housing trades on a median multiple of house prices to annual household income of 6.8 times, compared to 5.1 times in the UK and just 2.9 times in the US. According to the OECD, using 2009 data the ratio of house prices to incomes is about 35% above its long term average, which puts it at the top of end of comparable countries.
Source: Case-Shiller, Nationwide, ABS, AMP Capital Investors
Prices vs rents
According to the OECD the ratio of house prices to rents in Australia is 58% above its long term average. This is well above most other comparable countries. It is reflected in a gross rental yield of just 3.5% on houses and 4.5% on units, well below the 7%-plus net rental yield available on directly held commercial property. Finally, the rise in house price-to-income ratios over the last 20 years has gone hand-in-hand with a large rise in household debt. In 1990 the ratio of household debt to annual household disposable income in Australia was less than 40%, at the low end of OECD countries. Now it is 155% and at the high end of OECD countries. Naturally, this has led some to fret that the Australian housing market is a giant bubble at risk of collapsing at some point.
Source: OECD, AMP Capital Investors
However, as has been apparent over the last couple of years, there are a number of positives underpinning the Australian housing market. The big positive is a major undersupply of housing. The last few years has seen the supply of dwellings lag underlying demand. This reflects both a surge in demand on the back of record immigration levels but also restrictive development laws which have constrained supply, and the GFC which has constrained finance for developers. Cumulative under-building over the last few years is probably around 120,000 dwellings. This year Australia will probably start about 165,000 dwellings but underlying demand will be around 200,000. Undersupply is reflected in continuing low vacancy rates in rental housing. Under-building contrasts with the massive housing oversupply that arose during the US housing boom. On top of this, the Australian housing market didn’t see the same deterioration in lending standards that occurred in other countries. Homeownership rates haven’t increased – in fact they have fallen for the typical first homebuyer age group. Most mortgage debt increase over the last few decades went to older and wealthier Australians and this is all reflected in a
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relatively low mortgage arrears rate despite the debt increase. These factors are helping to support Australian house prices despite the fact they are relatively expensive.
Outlook
The intersection of high house prices with high household debt levels leaves Australia vulnerable. However, in the absence of a big surge in the supply of dwellings or a serious threat to the ability of Australians to service their loans a sharp fall in house prices is unlikely any time soon. In terms of the year ahead, strong auction clearance rates but softening housing finance present a mixed picture. Gains in average house prices are likely as employment is rising and while interest rates are on the way up they are still well below previous highs. For example, the standard variable rate is currently averaging around 6.9%, compared to 2008’s 9.6% peak. However, the ending of the First Home Owners Boost and renewed deterioration in housing affordability suggest gains will be constrained. Affordability
The big positive for Australian house prices is a major undersupply of housing
Source: Commonwealth Bank/HIA. REIA, AMP Capital Investors
improved dramatically into mid-2009, mainly due to a 40% collapse in mortgage rates. With house prices now back at record levels and mortgage rates on the rise again, affordability is pushing back to previous lows and likely to weaken further. Our assessment remains that average house price gains will slow to around 5% over the year ahead. Middle to upper-end housing could be a bit stronger as it is less sensitive to mortgage rates but will clearly benefit from higher employment and rising overall wealth levels. Low end housing could see prices soften given a greater sensitivity to mortgage rate increases, the ending of the First Home Owners Boost and weakness in first homebuyer demand after last year’s pull forward.
Concluding comments
Source: ABS, AMP Capital Investors
23
High house prices and high household debt levels remain Australia’s Achilles heel. A renewed deterioration in affordability is also a big negative. Given constrained supply, low levels of mortgage stress and the improving economy the most likely outcome is for constrained gains over the year ahead.
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Feature
Sharon Williams is the founder and managing director of boutique PR, marketing and creative agency Taurus Marketing in Sydney.. Visit: www.taurusmarketing.com.au
TOP TEN TIPS TIP 4: Networking This is all about you and your brand ‘being seen’ and ensuring you grab the opportunity to make a lasting and positive impression. A universal truth in business is most companies and professionals grow either in reputation by referral or word of mouth. Referrals or thirdparty endorsements are usually spontaneous, objective, honest and importantly – free! TIP 5: Motivate yourself and your staff Engage with your team on a regular basis, once a week for longer meetings and daily for a few minutes to keep the communication channels open at all times. This means everyone in the team should have a clear view of priorities and you can track quality, morale and customer service, and get to tremors before they become volcano eruptions. It reveals the need to assist each other and pull together when resources are maxed. TIP 6: Be recognisable as a brand Ensure your collateral, your logo, brochures, website and any other additional marketing material is conveying the correct message. A strong brand is vital in order for customers to identify and distinguish your business. So if you lay your collateral out on the table it should look uniform and from the same family. Use the positives in your business to create a strong image that is instantly recognisable, that will engage customers and draw people back to you for more. TIP 7: Make your website a gem In today’s business environment a website is your window to the world. It plays a vital part in any business. Ensure your website immediately gives the visitor a clear overview of the company and the services you offer – tell it how it is. Target the people you want to do business with. Use the website to communicate to visitors and ensure regular updates are made to the website to encourage visitors to stick around.
TOP 10 MARKETING TIPS FOR YOUR BUSINESS Effective marketing is a key growth driver in your business – if you stop marketing you stop growing and leave the competition open to take your place. If you think you don’t have to understand marketing, think again. You may have heard this before, but everyone in your business is responsible for marketing – from the receptionist to those in the accounts department. If you don’t buy in to that principle, be sure that good brands build wealth and equity – and make your company more valuable. So each time you market you are increasing the value of you – and your business. Here are 10 key tips to maximise your marketing results. TIP 1: Work out what you want to achieve You can’t hit the bullseye if you can’t see it. It will slow you down if you can’t define the target. If you had a clear idea of your aims and goals when you started your business, review them again now. Put a stake in the ground and define where you want to be in 12 months’ time. Having a clear business strategy in place from day one with measurable goals means both you and your team remain focused on achievement – everyone is on the bus to success. Or at least your team can know what success looks like. TIP 2: Know your market Finger-in-the-wind decisions aren’t good enough. Make sure you and your team have a thorough understanding of your industry, target audience and competitors. Take time to look at your customer base and segment it (divide it) into groups by size, spend, geography and industry. Researching your target customers and understanding their needs and behaviours (by asking them!) will ensure you have a better chance of fulfilling their needs. TIP 3: Database is my biggest bugbear If nothing else, work your database – it is sacred. Make sure you keep an up-to-date database of customers, suppliers and prospects. Being organised with your database enables you to keep track of correspondence with current customers, keep in touch with potential prospects and take responsibility for potential leads. Don’t miss out on opportunities to make your business grow further by simply not monitoring and maintaining your database.
TIP 8: Keep your message consistent Make it easy for people to understand what you do – so test it on customers, prospects and you family! Then check it’s easy to buy from you. It is vital you implement a tried and tested way to keep evaluating your brand. Measuring the effectiveness and financial return of what you do in terms of marketing enables you to assess what methods are effective for your business as well as which areas could be improved.
Make sure you keep an up-to-date database. Being organised with your database enables you to keep track of correspondence with current customers, keep in touch with potential prospects and take responsibility for potential leads TIP 9: Stand out from the crowd Walk the talk, make it bold, honest, genuine and stand out from your competition. As a business owner you should continually be looking at ways to update and improve your company’s offering and the skills in your business. Don’t be afraid to be daring and try something different for a fresh outlook. Continually look at adding value. TIP 10: Ensure that you have a regular positive media presence The power of positive press coverage is immense. Find out what your customers and prospects read and make it your job to speak to the editor with interesting market news. Give back to the industry and educate! Whether you are a sole owner, or you have a small- or mediumsized business, you should have the knowledge to enable you to be a spokesperson in the press. The first step is getting to know your local rag: there are many business opportunities to be had from appearing in your local paper. If I can do it – you can!
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What’s your tagline? By Michelle LaBrosse, founder of Cheetah Learning
W
ith the explosion of social media, you’re hearing a lot about personal brands again. Now, Andy Warhol’s infamous 15 minutes of fame is a reality for anyone who can upload a video to YouTube or
create a blog. However, as a project manager, when I think of personal brands I like to think about it in terms of how people experience you. What do people think about you? What’s your reputation? Let’s turn those questions around. How do you want people to think of you? What do you want your tagline to be? If you think about what you want to accomplish this year, what is your mantra? Think of a word or a tagline that will inspire you this year. Some people like the clarity of a single word, like ‘simplify’. Others get more inspired by a tagline like Nike’s famous ‘Just Do It’. My tagline for the year is ‘energise’, because I plan to wrap up my first round of energy self-sufficiency projects around the country as part of my Cheetah Power initiative. I also need to keep my energy high for all the Cheetahs around the world who are practicing fast and fantastic project management.
Bring it to life
Write your tagline down or create a simple graphic of it, and post it where you can see it. What we can visualise, we can make happen. Think of five specific behaviours you need to model for your tagline to be experienced by
others. For example, if your tagline is simplify, what are you going to do so people can experience you as someone who simplifies things? Are you going to create agendas and e-mail them at the start of a meeting? Are you going to come up with a new way for your team to collaborate online? Are you going to be a rallying cry and driver for getting rid of time-wasting tasks? Build into your year four things (one for each quarter) that would be significant achievements underneath the mantle of your tagline. When you’re writing a project plan, ask yourself what you might include in your plan to show your tagline in motion. Your tagline is really a tangible way to motivate yourself to be the business person you want to be.
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Columns
Katy O’Neil is national banking & finance manager for Sinclair Consulting, connecting specialist talent with leading employers across multiple financial services disciplines.
O’NEIL HOW DOES A MORTGAGE BROKER CREATE INCOME IN 2010? There are many problems facing brokers today that are affecting income streams. We are seeing changes in the mortgage industry in Australia, so the big question is how do brokers capitalise on existing business verticals to build a sustainable future? For business entrepreneurs within the mortgage industry this is the next logical step. The basics of broking are the same – you must be generating the leads to write the business but while you’re doing this to achieve short-term outcomes you are missing out on the big picture and a bigger piece of the pie. So how do you get a bigger piece and transition yourself from ‘just another broker’ to a business leader? Having personally worked in the mortgage industry across the globe for 15 years I have been in the privileged position to witness every market and every business model. This is particularly pertinent to Australian brokers as the Australian market is like no other, with banks offering rewards to brokers financially. While this arrangement is rewarding there are other opportunities to start capitalising on.
As a broker your loan book is your most valuable possession and you deserve a healthy profit for the time invested. So if your loan book is your biggest asset you should be utilising it to develop strategies on growing your business, not working in it. Unfortunately for the majority of brokers they are so focused on writing the loans this month that they lose sight of the opportunities for long-term strategic direction. To remedy this you need either a lot of start-up money or an existing business framework that offers support in the areas necessary to build a strong business. In order to develop your loan book to allow you to play golf three days a week or drive that new car, you require a team of loan writers and support staff, marketing capabilities, lead generation, financial planners, recruitment support, full training and development for new staff members – and the list goes on. With all of the operational functions covered this leaves you to focus on employing key staff within your mortgage business to support the growth of your loan book. Ultimately this set-up offers everything you need to build your wealth and a sustainable future with a loan book that currently far surpasses the value of the average Australian book.
How do you get a bigger piece and transition yourself from ‘just another broker’ to a business leader?
OFF THE CUFF John Mohnacheff
Group sales manager, Liberty Financial
What was the last book you read? The Phantoms of War, by David Horner, the history of the Australian SAS. If you did not live in Australia, where would you like to live? Somewhere is Southern France or Northern Italy. If you could sit down to lunch with anyone you like, who would it be? Billy Connolly, Robin Williams, Paul Keating and Gough Whitlam. What was the first job you ever had? Sweeping the floor at my dad’s cabinet-making factory. What do you do to unwind? Have a great red wine and a meal with family and friends. Sometimes I’ll read or listen to music…with a great red wine! What’s the most extravagant gift you ever bought yourself? A glorious John Perceval painting. It cost a fortune, but it’s worth every cent, for its beauty and provenance. What CD is currently playing in your car stereo? Lara Fabian, an amazing Belgian singer. She’s amazing. If you could give anyone starting out in business one piece of advice, what would it be? Have a plan, execute it, remain focussed, be patient and NEVER forget, that it’s the customer that will make your business a success. If I was not working in the mortgage industry, I would like to be…? A maker of exquisite furniture – I love working with timber. Or a wine maker…but that would never turn a profit!! Where was the last place you went on holiday? Camping over the Christmas Holidays in the Victorian Alps. Stunning.
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Cornish CORNISH COLUMN WHY THE UNITED STATES NEEDS REGULATION MORE THAN US Australian brokers are going to benefit from regulation. Not because it will chase away the cowboys and all those not fully committed to serving their clients (the GFC and other obstacles have done that) and not because it will fundamentally change the way a good broker does business. The National Consumer Credit Protection Act 2010 will open consumers’ eyes to the fact that going through a mortgage broker is a very good deal. Research has shown that brokers are trusted less than accountants, lawyers and other professionals but I believe all this is about to change. I think the main problem that consumers have is that they think the broker proposition is too good to be true. Who would file their taxes directly with the Australian Taxation Office if there were accountants who would do it for you and be paid by the ATO with no net loss to the taxpayer? But this is what the Australian mortgage broker brings to the table – a proposition that is almost too good to be true. A broker will work around the client’s schedule, work evenings, weekends, chase up loan applications and provide peace of mind during a very difficult time for the borrower. However, not all brokers are made equal. Before the GFC, before the credit crunch, there was the sub-prime crisis in the US. This was, arguably, the first domino to topple and set in motion a chain of events that almost brought down the entire global banking system. Key industry figures have been saying for years that we could not have a sub-prime crisis in Australia and they are right. Firstly, lenders do not offer sub-prime loans – and never have. Secondly, Australian brokers (at least the ones that I have come across in my three years in the country) do not act in the way US sub-prime brokers were acting in the lead up to the crisis. My first ‘real’ job out of university in 2003 was as a sub-prime mortgage broker in Colorado. I had been working at a coffee shop for six months when a friend who had been making good money working at the mid-sized (four offices) operation called me and asked if I’d be interested in working there. Lured by the amount of money on offer and the opportunity to stop waking up at 4am to serve people coffee, I went in for an interview and found that I had both a knack for selling and working out the best loan for the client. It was after I started working there that I started to see things that just didn’t sit right with me. The loan writers were required to ‘cold call’ people all day and into the evening to “have a chat” with them about their loan. We were told to ask them how much they were paying on their mortgage currently, what other bills they had and find out their social security number so we could run a credit check. We would find out the rough value of their house from a website that provided such data and put the loan folder in the back room for lenders to grade. Each day a representative from each lender would come by our office, have a look at our files and make an offer on a blank page on the front. The offer would contain three loan prices and the “back-end” commission we would get for each one. The cheapest loan would get us about 1% upfront commission, the middle would get us 2.5% upfront commission and the most expensive would earn us 3.5% of the loan value as soon as the deal closed. Apart from the pricing, each of these loans was identical. As you can imagine, this provided an incentive for brokers to see how far they could push their clients to achieve the maximum commission level. But that wasn’t the only commission that brokers were getting. The law also allowed brokers to charge borrowers a “front-end” commission. This could be any amount up to 3.5%. My company would not let us write a loan unless we were able to get 4% commission between the front-end and back-end. This business model was perfectly legal. In my three months in the job, I sold only two loans – and both benefited my clients (I was actually reprimanded for charging less than the minimum 4%). I made US$8,000 from those two loans and then handed in my resignation and went to work for a country newspaper for $10 an hour. Australian brokers need regulation to provide consumers with peace of mind. American brokers need regulation to ensure this kind of operation cannot legally exist in the future – and to avert another global financial crisis.
A broker will work around the client’s schedule, work evenings, weekends, chase up loan applications and provide peace of mind during a very difficult time for the borrower
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Feature
Fighting fit – lessons for brokers Forget gyms, early-morning jogs or your Wii Fit. As Agnes Gajewska finds out, the martial art of Taekwondo is an ideal form of exercise for brokers
T
ranslated roughly as “the art of smashing with hands and feet”, Taekwondo is one of the hundreds of martial arts in the world. It relies on discipline, self-motivation, fitness and respect; traits which, according to business and martial arts pundits, are desirable in the mortgage broking arena.
A bit about the background
You may be familiar with East-Asian martial arts (they are most commonly portrayed by super-flexible, usually Asian, characters in Hollywood blockbusters). You may also be aware that there are many – and fairly variable – types of martial arts all over the world. Although they vary in technique and focus, martial arts are generally grouped together because they combine the artistry of movement with the science of technique. Most of the world’s martial arts also abide by an ethics or moral code and are practised as a way of selfimprovement, wellbeing and a method of self defence, rather than offensively. On the whole they work on the premise that the body can be trained to become a weapon should the situation call for it, but that it should never be misused for violence. Taekwondo shares its roots with the century-old Korean martial art of taekkyeon – a predominantly kicking technique. After World War II in the 1950s, South Korea’s General Choi revived Korean martial arts by amalgamating different schools of martial arts – but keeping a strong focus on taekkyeon – to create Taekwondo for use in the contemporary military. It has since been declared the official sport of South Korea and admitted as a sport in the summer Olympic games.
Structure
Like many martial arts, Taekwondo works according to a belt ranking system. This system is divided into two categories – the junior (coloured) belts and the senior (black) belts. Beginners start with a white belt and work their way through coloured belts until they reach black belt (or first “dan”). From this point on they become senior belts and progress by increasing the seniority of their dan – from first to ninth. There is a minimum
training time before a student can progress to a higher dan. While this minimum time varies between clubs, it generally takes a minimum of 36–44 years to get from first to ninth dan. Taekwondo training is carried out in a “dojang” – a specially designed school of learning. Each training session is led by a Taekwondo master and made up of several components which develop focus, strength, flexibility, fitness, speed, balance, awareness, selfdefence mechanisms and coordination while building character, leadership, respect, discipline and motivation. A class is generally made up of a mixture of mediation, stretches, exercises, sparring, self defence and patterns. It is common for all junior (and sometimes even senior) belts to be part of the same training session.
Simple self defence: What to do if someone grabs your throat from behind: • Stomp on attacker’s foot • Strike back with closed fist to the groin • Kick back to the attacker’s knee • Get out of there fast!
A good way for business?
Although on the surface it may seem like Taekwondo and mortgage brokers have very little in common, according to sixth dan and Taekwondo master Ron
A word on women’s self defence Looking at the friendly blue eyes and broad smile of the slim, attractive woman standing in front of me, I would never have guessed that she is lethal. But Anne Mouland-Claassens, who wears a third dan black belt in TKD, a black belt in Hapkido and has trained in Mui Thai and Haidon Kumdo, is more than capable of causing damage ... if provoked. Don’t worry; she uses her ability for good, not evil. In fact, other than flexing her martial arts, personal trainer and Zumba instructor muscles, Mouland-Claassens has recently combined her martial arts skills with TDS (tactical defence systems – a course taught to the CIA and FBI) qualifications and started regular women’s self-defence classes. “Women are often seen as easier targets because they are smaller and due to muscle mass differences are seen as weaker,” she says. “But you should never judge a book by its cover.” According to Mouland-Claassens the body – regardless whether it belongs to a 100kg male or a 40kg female – responds the same when its sensitive areas are attacked. “Size doesn’t matter – the element of surprise and striking does. There are a number of areas … that are weak and cannot be built-up or are exposed to a strike. Effective self-defence is all about knowing the vulnerable areas and knowing the body’s response or reflex action when they are hit,” Mouland-Claassens explains. But learning self-defence isn’t really about causing grievous bodily harm; it’s about being self-aware, confident and in control of every situation – and ensuring that you always have a chance to get away. However, if you do end up in a sticky situation, having physical training can make a huge difference. “The outcome of an attack is usually determined in the first few seconds. Getting away uninjured is all about how you react. When you train, you build up “muscle memory”, teaching your body to react to certain situations without stopping for thought. And it is these naturalised reactions that can ultimately save a life,” Mouland-Claassens says. “Unfortunately 80% of people attend a self-defence course after an incident. I always think it’s better to know and not need, rather than need and not know.”
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Anne Mouland-Claassens runs self-defence classes four times a year at Empower Fitness Centre and Dojang in Brookvale, NSW. For more information contact 0450 168 198 or visit www.imt.org.au
Claassens, the martial art has many similarities to the world of business. “By doing TKD, students not only learn a martial art, but through the rigours of training also develop an indomitable spirit, confidence, self-esteem, courtesy and respect. They are all attributes that are taken into life, and all that help to build a successful business psyche,” he explains. In addition, he says TKD is an activity that is goaloriented – each student is responsible for their own progress. If they train hard they are likely to learn more, if not, they are likely to stay in the lower ranks for longer. While all students are supported by a community of junior and senior belts, Taekwondo requires selfmotivation within this larger framework – very much like a sole loan writer, within the realms of a larger group, aggregator or industry body, who needs to work on their own to achieve success. According to Claassens, since successful mortgage brokers share the drive for self-improvement with martial artists, they generally enjoy and benefit from classes. However, martial arts can be particularly beneficial for mortgage brokers who lack drive. “Personal development, whether in business or within a physical arena like Taekwondo, is character building because you develop confidence and selfesteem,” he says. “You will find that a lot of leaders in business have dabbled in martial arts or are still doing martial arts, and this is part of why they are successful in life and business.” President of the FBAA, and former Zen Do Kai martial artist, Peter White, agrees that there are synergies between the two and that brokers can benefit from taking up a martial art. “Martial arts bring focus, philosophy, quick mental and strong physical capabilities, the means to endure all that comes in front of you … and, importantly, knowing when to walk away. In martial arts it’s knowing when not to fight, in mortgage broking and lending it’s knowing when a deal is not a deal,” he says. He adds that other qualities which also find parallels in the martial arts world are assessing clients’ needs quickly, maintaining control over the situation and learning to direct focus to where it is needed. “In martial arts the same principles apply,” he says, “it’s just that you’re [making an assessment] on a fight rather than the client’s lending needs.”
Personal benefits
According to White and Claassens, martial arts also carry benefits that extend beyond good business and into the general realm of wellbeing.
Fitness: Most people’s primary motivation to get into martial arts is fitness.
“Martial arts and fitness go hand in hand, as everything you do is scientifically designed to enhance and strengthen. Through utilising your breathing and exertion through technique you are constantly challenging your body,” Claassens explains. He adds that many jobs, including mortgage broking, are quite sedentary, but that it is important to look after yourself and keep the body functioning at its optimum level. “People come to Taekwondo because it helps them to compensate for their lack of activity at work,” he says.
• The TKD way to work your quadriceps and hamstring while loosening up your groin and hips
Flexibility:
• Raise the outside leg in one smooth swing
Unlike many other forms of sport and physical activity, TKD is not ageist. According to Ron it is suitable for people from 6 to 65 – and even beyond. Since each student ultimately controls the intensity with which they do exercises, there are no weight, age, size, ability or fitness prerequisites. It is both set out within a framework and individual. Because of this trait, attendance is also flexible. There is no fear of being left behind if a person misses a class. According to Claassens, this sort of flexibility is an important element for business people, who often see their age or physical fitness as a barrier for getting into sport. The flexibility around attendance and progression coupled with the support of the group also means that business people can work autonomously while being motivated.
Getting personal about safety: Another major factor that draws people to TKD is learning self-defence. Martial artists rehearse selfdefence scenarios to learn how to react to an attack. Constant repetition creates muscle and subliminal memory which increases a defender’s chances in the case of an attack. According to former Kings Cross police officer (and author of Dirty Work) Glen McNamara, self-defence is immensely important. “Something like self-defence is important. If more people knew self-defence it would be better,” he says. White agrees. “In this day and age self-defence is important for everyone (young and old). You need to know how to protect yourself and your family, and even more so, self-defence teaches you when to walk away from a fight.”
What you need to get started According to Claassens, the hardest part is actually stepping into a dojang. All you need for your first class are comfortable exercise clothes, water and a positive attitude. The bottom line (and brokers understand bottom lines) is that it takes guts to try something new, but in the wise words of Master Ron, “suck it up and give it a go”.
Get TKD-ing! Front leg raises
• Stand near a rail or wall for balance with one hand on rail or wall
• Repeat ten times per leg • This exercise can be done sideways and kicking backwards
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Feature
One year on What a difference 12 months can make … or maybe not. Australian Broker reflects on the stories that made headlines in the magazine one year ago
Issue: Australian Broker issue 6.7
Headline: “Lahiff resignation leaves questions unanswered” (page 12)
Headline: “CBA backlog blitz a good start” (cover page)
What we reported: While listed broker Mortgage Choice claimed it was “business as usual” following the resignation of its managing director, Paul Lahiff, the announcement left a string of questions hanging in the air. Lahiff put an end to his six-year career with the company on 1 April. Mortgage Choice spokespeople claimed that the decision was by mutual consent but were unable to provide a reason for the industry heavyweight’s resignation. The Mortgage Choice spokesperson said that the company would look for someone who possessed similar characteristics to Lahiff. “But obviously in business every new leader brings something new to the table, so we look forward to somebody coming onboard and giving us some great input”.
What we reported: Industry reacted well to the CBA’s effort to make headway through its massive processing backlog but, while the efforts were appreciated, key figures said more needed to be done. CBA’s ‘backlog blitz’ involved 160 processing staff across Australia working over the last weekend of March to process 3,121 files. Head of third party banking, Kathy Cummings, said that the initiative made “significant inroads into the number of current loans in progress”. The need for the backlog blitz was put down to the huge volume of loan applications going through the lender’s system and broker groups appreciated the effort involved in helping them get loans processed more quickly. What has happened since? CBA spent 2009 gorging itself on home loans and is now satisfied with the amount of market share it currently enjoys. This means that less loans are going through its systems than there were a year ago but processing times remain a significant bugbear for brokers, who have to manage client expectations. In order to solve some of the problems that can delay home loan applications, CBA has become the first lender to go entirely paper-free in its processing facility. Cummings said that processing times had come down as a result but would continue to do so as the technology matures.
Stuart Fuller
Headline: “RMBS comeback some time off ” (page 8) What we reported: The light at the end of the securitisation tunnel may not be visible to Australia’s nondeposit taking institutions for a while yet, as public issuance of residential mortgage backed securities (RMBS) remains constrained. Stuart Fuller, chairman of the Australian Securitisation Forum, said that while the government, through the Australian Office of Financial Management (AOFM), was continuing to implement its support of the RMBS market, this had done little to reinstate demand from private investors. What has happened since? Non-bank lenders took advantage of the AOFM’s $8bn initiative, which helped open the door to funding for some players in the market. For others, the ability to package up loans and sell them on the open market is still a distant dream. While RMBS markets have recovered to the point that ADIs are able to sell issues at 130 basis points over the bank bill swap rate, investor appetite is nowhere near the level needed to feed the entire nonbank sector. However, recent comments by the Reserve Bank assistant governor Guy Debelle painted a promising picture for the future of the RMBS market and the future of competition in the Australian lending space. Hopefully, this time next year, this column will be able to say it is back to business as usual.
What has happened since? The reason behind Lahiff’s departure was never revealed but what has happened since his shock resignation is widely known. Former Choice Aggregation chief Michael Russell took up the mantle at Mortgage Choice and has helped steer the company through the GFC and boosted its share price in the process. Lahiff’s LinkedIn profile has him listed as the CEO of the privately held management consultant firm WDScott Ltd. The firm’s profile describes it as “an international management consulting firm with offices in Australia and the UK”. The WDScott brand was first launched in 1938 and was recently relaunched under WDScott Ltd.
Paul Lahiff
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Services
Receive breaking news updates direct to your inbox. Sign-up for the FREE e-newsletter at www.brokernews.com.au AGGREGATOR / WHOLESALE BROKER PLAN Australia 1300 78 78 14 www.planaustralia.com.au mail@planaustralia.com.au page 5 COMMERCIAL Banksia Financial Group 1800 333 114 www.banksiagroup.com.au page 9
www.residex.com.au The House Price Information People
RAMS Homeloans 1300 130 769 www.ramsbroker.com.au page 3
SHORT TERM LENDER Crown & Gleeson 1800 735 626 www.crownandgleeson.com.au page 2
MORTGAGE MANAGER / NON-BANK Mango Media 02 9555 7073 www.mangomedia.com.au page 1
Interim Finance 02 9971 6650 www.interimfinance.com.au page 6
OTHER SERVICES Kemp Strang 02 9225 2500 www.kempstrang.com.au info@kempstrang.com.au page 12
DEBTOR FINANCE Oxford Funding Pty Ltd 1800 850 509 www.oxfordfunding.com.au info@oxfordfunding.com.au page 13
MKM Capital 1300 762 151 www.mkmcapital.com.au page 8
Vanilla Loans 1300 710729 www.vanillaloans.com.au page 19
NON-CONFORMING Liberty Financial 13 11 80 www.liberty.com.au page 7
Think Tank Property Finance 1300 781 043 www.thinktank.net.au deal@thinktank.net.au page 15
LENDER Citibank Mortgages 1300 651 059 www.mortgagebroker.citibank.com.au page 32
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Residex 1300 139 775 www.residex.com.au page 23 RP Data www.rpdata.com page 27 Trailerhomes 0417 392 132 page 29
NCF Financial Services Pty Ltd 1300 550 707 www.ncf1.com.au page 10 Prime Finance Pty Ltd 1300 130 538 www.primefinance.com.au page 16 Rapid Capital 07 5562 2485 www.rapidcapital.com.au page 4 SOFTWARE / IT Stargate Group 1300 723 613 www.stargategroup.com.au Symmetrycrm@stargategroup.com.au page 11 WHOLESALE Resimac 1300 764 447 www.resimac.com.au newbusiness@resimac.com.au page 17
To advertise in Australian Broker, Call Simon Kerslake on +61 2 8437 4786
Published on Apr 16, 2010
The no. 1 news magazine for Australian brokers.
Published on Apr 16, 2010
The no. 1 news magazine for Australian brokers.